WEEKLY TIP INSIGHT: 11th JANUARY 2019
“UK Retail Trading Updates: Bargains to be had in the New Year Sales?”
A string of profit warnings – and chief executive Mike Ashley’s warning that the UK high street risked being ‘smashed’ over the Christmas period after the ‘worst November on record’ – set the tone for investor expectations over the festive period. Was all the pessimism justified? In this week’s article, we take a look at a selection of recent trading updates by high-street retailers and supermarkets, and review broker and tipster outlook in each case.
UK High Street & Supermarket Tip Sentiment (Last 3 Months)
has been the subject of a great deal of media scrutiny in recent months as it presents a perfect case study of a retailer struggling with rising rates and rents, decreasing consumer confidence, and online competition. The firm’s latest trading statement did little to quell investor fears; UK sales fell by over 6% compared to the same period last year, though digital sales grew by 4.6%. The news hasn’t been taken well, with shares down -10.5% at the time of writing. Broker and tipster sentiment has been predictably negative over the last three months, with no single broker or tipster rating the shares a buy since April last year. , while two brokers – and – have both reiterated hold ratings on the shares since the turn of the year.
A quick word on , which followed up an incredible 2017 with strong performance last year: tipster and broker sentiment remains broadly positive going into 2019. Solid first-half numbers have caused has caused , while considers the shares very appealing due to “high quality returns and defensive characteristics, which give some comfort in this market”.
Though early in the year, high street baker has also been a winner so far; shares are up over 15% since the turn of the year as it lifted profit guidance following a “very strong” Christmas trading period. No change from any of the brokers, though: reiterated a buy rating this week, while and retained their hold ratings. No sitting on the fence when it comes to though, as it continues to divide opinion. Of twenty tips tracked by over the last three months, seven have been positive, and thirteen have been negative. was disheartening as the retailer struggled with “a very challenging trading period”. Like-for-like sales were down 2.2% over the same period last year, but the bad news appeared to be already priced into the shares as they barely responded (+0.3% at the time of writing). Earlier this week slapped a sell rating on the shares, while also advised potential investors to stay away over the festive period. Broker , however, recently offered a contrasting buy recommendation on the shares.
On to the supermarkets, with broker and tipsters broadly positive on both and . The former’s trading update this week offered little detail about the potential £11bn Asda merger, but the stressed the growing importance of the deal, as did an analyst at . Like-for-like sales fell 1.1% over the same period last year. Morrison’s on the other hand saw like-for-like sales increase by 3.6%. Broker and have both issued buy ratings on Sainsbury’s shares in recent days, while reiterated a sell recommendation. considers Sainsbury’s to be a risky bet, instead preferring Morrison’s as shares have “room to grow, trading is on a roll and the shares are good value”. is however more cautious on Morrison’s and offers a hold rating, noting that “competition remains fierce, but the yield offers some compensation”.
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Disclaimer: The contents of this article should not be considered financial advice. All information correct as at 10th January 2019.
The information, investment views and recommendations in this article are provided for general information purposes only. Nothing in this article should be construed as a solicitation to buy or sell any financial product relating to any companies under discussion or to engage in or refrain from doing so or engaging in any other transaction. Any opinions or comments are made to the best of the knowledge and belief of the writer but no responsibility is accepted for actions based on such opinions or comments. Vox Markets may receive payment from companies mentioned for enhanced profiling or publication presence. The writer may or may not hold investments in the companies under discussion.
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