As the festive trading period draws to a close, investor focus has turned to the highly anticipated retail performance updates in early January, with hedge funds eyeing the retail sector for potential profits after warnings of “disastrous” pre-Christmas trading conditions, according to a report by the Financial Times.
Prominent UK retailers have faced pressure from short-sellers, including Kingfisher, owner of B&Q and Screwfix; Burberry, the British luxury brand recently removed from the blue-chip index; and online fashion retailer Boohoo.
Short bets have also targeted J Sainsbury, the UK’s second-largest supermarket chain, and Pets at Home, a leading pet and veterinary retailer, according to filings with the Financial Conduct Authority.
Despite early Black Friday discounts, official data has reportedly revealed UK retail sales in November failed to meet expectations. The latest CBI distributive trades survey, which mainly tracks large high-street retailers, reported only a slight improvement in retail sales balance from -18 in November to -15 in December, with sales volumes described as “poor” for the season.
Footfall data also paints a bleak picture: shopper visits to retail stores were down 11.4% compared to the previous year during the final week before Christmas, according to Rendle Intelligence and Insights.
Post-Christmas trading updates are set to begin with Next, often regarded as a high street bellwether, on 6 January. Subsequent updates from retailers such as B&M, Marks & Spencer, JD Sports, Currys, and Dunelm will offer further insight into the sector’s health.
Meanwhile, the British Retail Consortium (BRC) has warned of an impending “spending squeeze” in January.
Confidence in the UK economy took a significant hit in December, with BRC-Opinium data showing an eight-point drop to -27. Public spending intentions also fell by six points, with declines projected across nearly all retail categories.
Helen Dickinson, BRC’s chief executive, cautioned that retailers face difficult choices amid stagnating sales growth. “Retailers will have no choice but to raise prices or cut costs – closing stores and freezing recruitment,” she warned.
