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How to Get Rich Investing in Stocks by Riding the Electron Wave

Are there suddenly signs of growth in UK retail?

Economics / Sector Analysis Jul 13, 2012 - 02:35 AM GMT

By: Nick_Dockerty

Economics

Whisper it but there’s just a touch of optimism surrounding the retail sector in the UK at the moment.

The past financial year has been a difficult one for the majority of retailers but there have been just enough signs in recent company results and economic indicators that things might be picking up.


The Diamond Jubilee has clearly influenced figures and retailers will be hoping to leverage the forthcoming Olympic games in a similar style. The recent fall in inflation to 2.8% from 3% will help too.

Tesco announced that it is to leave Japan. It’s a move designed to sharpen its focus after reporting consecutive quarters of poor earnings.

The UK’s largest supermarket chain entered Japan in 2003 and while the decision to leave has been greeted with approval by City analysts, Tesco still needs to invest 40 million more before it can eventually exit Japan.

Tesco announced a drop in like-for-like sales, excluding VAT and fuel, of 1.5% in its last quarter. It must be said that these figures would have looked a lot rosier if they had included sales from the week before the Diamond Jubilee which its Chief Executive Philip Clarke announced had topped a staggering £1 billion.

Elsewhere in UK retail Home Retail Group became the latest in a long line of retailers to post challenging results. In its latest trading update two of its flagship brands Argos and Homebase posted contrasting falls in sales.

Catalogue-based business Argos has been suffering from the twin threats of online retailer Amazon and a fall in disposable incomes of many ordinary UK households. Despite these Argos posted a 0.2% fall in sales in the 13 weeks to June 2 which were much better than analysts had expected and certainly an improvement on the fall of 8.5% in the previous quarter.

On the up were sales in laptops and tablets but on the slide were sales in TVs and video games.

Meanwhile Homebase recorded an 8.3% drop in like-for-like sales compared with a 6.5% drop in the previous quarter. One of the main contributing factors to this was poor sales in seasonal items such as garden furniture which tend to lose their appeal somewhat during sustained periods of torrential rain.

Dixons retail announced an overall fall in pre-tax profits for the year ended 2012 of £70.8 million lower than the £85.3 million it made in the previous year. However, profits were up 15% and 12% in UK & Ireland and Northern Europe respectively. Dixons said that they thought they were ‘well-positioned for the year ahead’, a statement that was given credibility by a rise in like-for-like sales of 5% in the final quarter.

Nick Dockerty is a financial writer and researcher for IG Markets, a leading CFD provider. The above comments do not constitute investment advice and IG Markets accepts no responsibility for any use that may be made of them. Visit http://www.igmarkets.co.uk/

© 2012 Copyright Nick Dockerty – All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


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