08.01.2025
Are we soon going to see a rage of major discount sales hitting the UK High Streets and shopping centres?
Footfall in the run up to Christmas has been reported has being some 11% down on previous year figures, making two years lower on the trot.
Perhaps it was the British public not actually ’trotting’ out but staying in and letting their fingers do the walking as the internet offers shone through.
With the latest Budget measures creating fears within commerce generally, the retail sector has been suffering at their bank accounts as well as at their tills.
The weather conditions, wage rises, higher national insurance costs, increased energy bills and cost of goods and services will have been impactive.
In reporting terms this week is important as the major retail groups report their latest Trading Updates.
UK retail and grocery sales are said to have hit a Christmas high, but just how much of that was a reflection of price inflation.
Yesterday we had Next (LON:NXT), reporting that Christmas trading was better than expected, showing a 6% rise in full-price sales for the nine weeks to 28th December, enabling boss Lord Wolfson to raise his guidance for profits for the fourth time in the last six months.
Tomorrow companies like Tesco (LON:TSCO), Marks & Spencer (LON:MKS), Greggs (LON:GRG) and Hilton Food Group (LON:HFG) will be issuing their Trading Updates, while J Sainsbury (LON:SBRY) will do similar on Friday morning.
Brokers AJ Bell have been impressed by Marks & Spencer Chief Executive Stuart Machin as he has overseen its programme of sustainable growth.
Will its Update tomorrow show stronger food sales and weaker clothing tills ringing?
With nearly 1,500 stores, two-thirds of which are in the UK, the £7.7bn valued Marks reports that selling food products makes up some 60% plus of group sales, with clothing, hygiene and household accounting for nearly 30%, while distribution makes up the balance.
Around 17 analysts follow the group, the majority of whom rate the group’s shares as a Buy, with the consensus average Target Price for its shares at 435p set against its current 380p.
Over at Tesco, which is capitalised at around £25bn, it is expected to reveal that its Christmas sales were 5.0% up in the 12 weeks up to 29th December.
UK sales make up some 92% of Tesco’s turnover through its near 4,000 stores.
Its shares are followed by 14 analysts, most of whom call out the shares as a Buy, with an average Target Price of 400p against the current 370p.
Food-on-the go retailer Greggs, valued at £2.9bn with its shares at a hefty 2832p each.
Some 14 analysts follow the group, with the mean consensus opinion being that the group’s shares will outperform, with the average Target Price being 3308p, whilst the most bullish broker goes for 4040p for its shares.
J Sainsbury, which is capitalised at around £6.3bn, is one of the British food distribution leaders, making up over 98% of its yearly sales.
It will be issuing its Trading Update on Friday morning.
The group’s shares are currently around 272p, while a consensus of the 13 analysts that follow the group aim for an average 308p for its shares, with 355p being the highest price objective.
As a supplier to all of the above, I like the look of the shares of Hilton Food Group, the food processing business, now at 905p valuing the company at some £800m.
Seven analysts follow the group, most of whom rate the shares as a Buy, with a consensus average Target Price of 1081p, in fact one actually goes for 1200p a share.
Retail and food sector analysts Clive Black and Darren Shirley at Shore Capital Markets are looking for the group’s 2024 results to show £3.94bn sales and £76.0m profits, earnings of 76.0p and paying a 32.9p dividend per share.
Tomorrow’s Trading Update could well see an upward adjustment of the broker’s estimates.
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