WH Smith, Next: Should you buy these stocks amid rising inflation?  

Highlights

• According to a BCC survey, 73% of the firms are increasing the prices to offset the impact of high wages, increased cost of raw materials, and soaring energy bills.
• Contracts worth around £7.1 billion with suppliers have been cancelled by UK retailers in the last one year, as per a Barclays Corporate Banking report. 

Inflation levels have been skyrocketing in the UK lately and businesses are suffering due to increase in input prices and energy costs. According to a recent survey conducted by the British Chambers of Commerce (BCC), among 1,000 UK firms surveyed from 17 January to 4 February, the companies are experiencing a cost of doing business crisis.

Due to this, around 73% of the firms are increasing the prices to offset the impact of high wages, increased cost of raw materials, and soaring energy bills. This may raise the cost of living for households even further amid the already ongoing inflationary crisis.

Chancellor Rishi Sunak was called out by the BCC to provide the firms with financial support and establish an energy price cap for small businesses temporarily, delay the planned rise in National Insurance by one year, and freeze any policy changes for the time being which may add to the already elevated business costs. Reaching 5.4% in December 2021, inflation reached its highest level since 1992, and it is expected to rise up to 7% in the coming months. Thus, firms must be provided all the required support amid the ongoing crisis.

In addition to inflation, ESG matters have also become a focal point for businesses. According to the Barclays Corporate Banking report published on 9 February, contracts worth around £7.1 billion with suppliers, who are unable to fulfil their ethical and sustainability requirements, were cancelled by UK retailers over the past one year. As investors are becoming more environmentally conscious, they are choosing to invest in the shares of companies that focus on sustainability, encouraging businesses to prioritise sustainable and ethical principles.

Let’s take a look at 3 UK retail stocks which may be affected by the news.

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WH Smith Plc (LON: SMWH)

Globally leading UK-based retailer WH Smith plc is renowned for selling news, books and convenience. The market cap of the FTSE250-listed company stood at £2,194.70 million and it has given a negative return of -0.33% to its shareholders in the last one year as of 9 February 2022, while its year-to-date return stood at 13.28%. WH Smith plc’s shares closed at GBX 1,676.50 on 9 February 2022.

Dunelm Group plc (LON: DNLM)

Holding a position among the UK’s largest home furnishings retailers Dunelm Group plc produces blinds, curtains, and accessories in its own factories. The market cap of the FTSE250-listed company stood at £2,632.10 million and it has given a return of 2.70% to its shareholders in the last one year as of 9 February, while its year-to-date return stood at -6.23%. Dunelm Group plc’s shares closed at GBX 1,295.00 on 5 January 2022.

Next plc (LON: NXT)

UK-based retail business Next plc is a seller of home products, clothing, and footwear. The market cap of the FTSE100-listed company stood at £9,603.11 million and it has delivered a negative return of -7.59% to its shareholders over the past year as of 9 February, while its year-to-date return stood at -11.02%. Next plc’s shares closed at GBX 7,252.00 on 9 February 2022.