The Notebook: Victoria Scholar on the retail winners this year
Where the City’s movers and shakers get a few things off their chest. Today, it’s Victoria Scholar of Interactive Investor.
We must dig beneath the headlines that favour stockpickers
During this period when consumers have been hit hard by rising mortgage rates, soaring rents, food inflation and expensive energy bills, you’d imagine that retail would be one of the last sectors investors would steer towards in the hunt for stock market returns. However price action this year tells a very different story, with a two-speed retail sector emerging, clearly separating the winners from the losers.
Marks & Spencer has been a standout FTSE 100 winner in 2023. Its shares are up around 95% since the start of January, with impressive gains this Wednesday following a strong set of results as its transformation continues at speed. During the half year, its clothing and home sales rose by 5.7%, adjusted operating profit increased by 30% to £223.4 million and margin grew to 12.1% from 9.8% in the corresponding period last year. Food also enjoyed a strong performance with sales up 14.7% and adjusted operating profit soaring by 130% to £164.9 million while its margin almost doubled to 4.3%. Early indications suggest Christmas looks set to be another robust period with strong trading momentum.
Primark’s parent company Associated British Foods has been another FTSE 100 retail winner in 2023 with shares up over 40% since the beginning of January. Sales at Primark are expected to hit £9 billion for the year, representing growth of 15% year-on-year, thanks to its value offering with consumers trading down to cheaper brands. It has also benefitted from lower material and freight costs as well as favourable exchange rate movements.
B&M European Value Retail and Next are among the other FTSE 100 retail winners this year, both with share price gains of over 20%.
Undeniably there have been some well-documented retail disasters like Wilko, Paperchase, Hunters and Planet Organic which all collapsed into administration this year. At the same time, there have been some incredible success stories, highlighting the importance of digging beneath the headlines during the current market dynamics that very much favour the stock pickers.
Buy-now-pay-later on the rise
According to Adobe Digital Insights, UK shoppers are likely see online shopping via buy-now-pay-later services increase by nearly 9% this Christmas to an all-time high of £3.7 billion. BNPL online spending is forecast to hit £17 billion in 2023, up 26% versus last year. The cost-of-living crisis with elevated inflation and a stream of rate hikes from the Bank of England has squeezed household budgets, prompting more consumers to spread repayments on their festive spending this year. Adobe anticipates BNPL sales of £544 million on Black Friday, Cyber Monday and Boxing Day discount days.
One to watch
A rare watch signed by watchmakers George Daniels and Roger Smith sold for $2.4 million in a record breaking auction at Sotherby’s in Geneva this week. It is a white gold Millennium model made in 2001 and was the last watch produced in the series. It was Smith’s own personal watch until he told it in 2008 for £100,000 and was the first watch with his name on it. The price was the highest ever paid for Roger Smith-signed wristwatch. It was bought by a collector and watch dealer from the United Arab Emirates.
A ‘superior alternative’ in AI
A Chinese artificial intelligence start-up founded by computer scientist Kai-Fu Lee has become a unicorn, fetching a valuation of over a $1 billion in less than eight months, fuelled by this year’s AI frenzy. According to Bloomberg, the company, 01.AI began building a team in March and started operating in June. The company’s “open-sourced, foundational large learning model, Yi-34B” is available to developers around the world in both Chinese and English. Lee told Bloomberg, “we want to provide a superior alternative not just for China but for the global market.”
Can I quote you on that?
“A UK recession probably already has begun”
An analysis by Bloomberg Economics shows
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