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Shares in leading UK retailers fell sharply on Thursday, erasing £2 billion ($2.45 billion) in market value, as concerns about weakening consumer confidence and mounting economic pressures overshadowed strong Christmas trading results.
Key Highlights
Pressure on Consumer Sentiment
- Retailers are bracing for higher employer taxes and minimum wage increases starting in April, compounding the sector’s challenges.
- The UK government’s rising borrowing costs have fueled fears of future tax hikes, further straining household budgets.
Inflationary Outlook
- Analysts predict inflation may tick up in the coming months, signaling more difficulties for consumers and businesses alike.
Performance of Major Retailers
Marks & Spencer (M&S)
- M&S reported above-expectations growth in the fourth quarter:
- Food sales rose 8.9%.
- Clothing, home, and beauty sales grew by 1.9%.
- Despite strong performance, its shares fell 6.5% as investors focused on the broader challenges facing the retail sector.
Tesco
- Tesco, the UK’s largest supermarket, posted a 4.1% rise in sales, driven by robust grocery demand.
- Shares dipped 1.3%, reflecting cautious sentiment despite its resilience.
Greggs and B&M
- Greggs, a value-focused bakery chain, saw sales growth slow to 2.5% in Q4 from 5% in Q3, sending its shares down 10%.
- B&M, a discount retailer, reported a 2.8% decline in underlying sales, resulting in a 12% drop in its stock.
Executive Insights
Greggs
Roisin Currie, CEO of Greggs, acknowledged cautious consumer spending but noted that the company’s affordability continues to attract value-seeking shoppers.
Tesco
Ken Murphy, Tesco’s CEO, remained optimistic despite projecting £250 million in additional costs from upcoming tax hikes. He emphasized Tesco’s adaptability, having weathered challenges such as supply chain crises and energy inflation in recent years.
Next
Next, a major clothing retailer, warned earlier this week of slowing sales growth in the 2025/26 fiscal year, citing tax hikes’ anticipated impact on employment and prices.
Broader Market Context
While the retail sector suffered, Britain’s globally focused FTSE 100 index climbed 0.5%, buoyed by gains in other industries.
Outlook for Retailers
With economic uncertainties persisting, UK retailers face significant challenges in maintaining profitability. Rising costs, inflation, and cautious consumer spending will likely continue to weigh on the sector, despite pockets of resilience in grocery and value-focused offerings.
Investors will remain cautious as they evaluate the balance between near-term pressures and the sector’s ability to adapt to a rapidly evolving economic landscape.
