UK retail finally gets a May break

Monday, Jun 11 2018 by

From the latest Barclaycard spending report for May, we finally get some welcome news for UK consumer spending:

Consumer spending grew 5.1 per cent year-on-year in May, the highest level seen since April 2017

 In-store spending rose by 2.6 per cent as good weather encouraged shoppers to head out and about 

Non-essential expenditure increased 4.6 per cent, its highest level of growth in more than a year, as garden centres, clothing and pubs performed strongly

OK, so we should not get too bullish as clearly, the better weather over the last month or so has been a real boon to pubs and clothes shops. 

But still, this has got to be good news especially for online clothing retailers (ASOS (LON:ASC), Boohoo.Com (LON:BOO), QUIZ (LON:QUIZ), Next (LON:NXT) ) and pubs and restaurants (EI (LON:EIG), Revolution Bars (LON:RBG) ). 

Looking at the way that non-food retail (F3RETG in the chart below) has underperformed relative to the broader UK stock market (NMX) since 2015, this unloved sector might finally be due a bout of outperformance!



And remember, pubs should hopefully get an extra boost from the World Cup, as long as England doesn't get knocked out at the group stages!). Remember, the longer that England stay in the tournament, the better for the likes of ITV (LON:ITV) on their advertising revenues...

Note in the chart below how ITV looks to be breaking out of the 2-year downtrend, with a gap at around 218p that could be filled by the next upmove. 


DIY stores have had a very good May too apparently, with May spending +7.3% y/y, so perhaps better news for Kingfisher (LON:KGF) too. 

Finally, amusement parks are seeing a strong pick up in demand, so this better weather story might be a good boost for Merlin Entertainments (LON:MERL) too. This plays into the trend in favour of spending on "experiences", which…

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My opinions only, not investment recommendations: Please Do Your Own Research

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Boohoo Group PLC, formerly plc, is an online fashion retail group. The Company is based in the United Kingdom and has a presence in the United Kingdom, the United States, Europe and Australia, selling products to almost every country in the world. The Company owns the boohoo, boohooMAN, PrettyLittleThing, Nasty Gal, MissPap and Karen Millen and Coast brands. These brands design, source, market and sell clothing, shoes, accessories and beauty products targeted at 16-30 year old consumers in the United Kingdom and internationally. more »

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NEXT plc is a United Kingdom-based retailer offering clothing, footwear, accessories and home products. The Company's segments include NEXT Retail, a chain of over 500 stores in the United Kingdom and Eire; NEXT Directory, an online and catalogue shopping business with over four million active customers and international Websites serving approximately 70 countries; NEXT International Retail, with approximately 200 mainly franchised stores; NEXT Sourcing, which designs and sources NEXT branded products; Lipsy, which designs and sells Lipsy branded younger women's fashion products, and Property Management, which holds properties and property leases which are sub-let to other segments and external parties. Lipsy also sells directly through its own stores and Website, to wholesale customers and to franchise partners. The Company's franchise partners operate approximately 180 stores in over 30 countries. more »

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Asos PLC is a global fashion destination for a range of things. The Company sells and offers a range of fashion-related content on The Company's segments include UK, US, EU and RoW. It sells over 85,000 branded and own-label products through localized mobile and Web experiences, delivering from its fulfilment centers in the United Kingdom, the United States, Europe and across the world. It offers approximately 75,000 separate clothing ranges, spanning women's wear and menswear, footwear and accessories, alongside its jewelry and beauty collections. The Company's collection of specialist own-label lines includes ASOS Curve, ASOS Maternity, ASOS Tall and ASOS Petite. The Company caters a range of customer segments and sizes, across all categories and price points. It also operates returns centers in Australia and Poland. It operates country-specific Websites in Australia, France, Germany, Italy, Spain, Russia and the Unites States. more »

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  Is LON:BOO fundamentally strong or weak? Find out More »

2 Posts on this Thread show/hide all

Howard Adams 11th Jun '18 1 of 2

Hi Edmund

Nice posting, thanks.

FWIW, to my surprise, my Minervini screen is throwing up US retailers which have notable momentum and earnings uplifts. £DECK (Deckers Outdoor), £BURL (Burlington Stores), Five Below Inc. and £TIF (Tiffany & Co) - disclosure I hold £DECK & £BURL.

I have no idea if there is a read across between US & UK, but both economies have (record) high employment figures, recently raised minimum wages and quite notable population increases through migration. In addition I believe consumer debt is moving up again in both economies.


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Gromley 12th Jun '18 2 of 2

Nice summary Edmund.

I had intended in the early part of the year to spend some time go through all of the updates from the UK retailers to look for the likely winners and the likely turning point - other factors unfortunately largely kept me a way from that and I still haven't been able to do so thus far.

But on the upside - I don't think I have missed anything yet!

I would be very cautious to take much optimism from they May numbers you quote - as you say the weather will have been a factor and I don't think there is any reason yet to believe the trend (in retail traded) is near to turning.

There was a mini rally for UK retailers back in September on the back of some promising monthly numbers - but there were totally clear indicators from at least two of the sources that this was all about year on year differences in the weather. As the next months figures came in doom and gloom resumed.

I believe that in due course there will be some very big winners from UK retail, so I can understand the desire to find the turning point and get in at "the bottom".

In fact though I don't think there is any such urgency - if you look for example at the Debenhams (LON:DEB) chart for 2008/9  (and I infer no comment whatever on the prospects for Debenhams - just using it as an example).


The price rose from the 20s up to around 94p, but there was ample opportunity to get in, in the 30s once it was much clearer that the recovery was in.

The Next (LON:NXT) chart for the same period is quite exciting too (although 'only' doubling)


This time around Next (LON:NXT) is already up around 70% from its low in Summer 2017, so perhaps my caution has caused me to miss the boat here. Personally I feel that the Next (LON:NXT) recovery may be a little premature, but in any case, despite its reputation as 'bellweather' I don't think it is necessarily representative of the segment as a whole.

All just my opinion however.


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