UK retailers will be watched closely heading into the new year, with earnings from several retailers including Next, JD Sports and B&M.
Several retailers have received upgrades in their brokerage ratings in recent weeks such as Next and Boohoo.
Credit Suisse has backed several UK retailers ahead of a heavy month of trading updates. Analyst Simon Irwin sees some UK retailers increasing guidance after Christmas trading held up well for the majority of firms. Irwin stated promotional activity had been fairly modest, apart from some over-stocked names and brands, most notably Adidas.
As a result, Irwin expects a number of retailers to increase current year guidance or guide to the upper ranges, including Next, B&M, JD Sports and Marks & Spencer.
Next shares have recovered 25% over the past three months and was recently upgraded by Stifel. Analyst Caroline Gulliver upgraded Next to Buy, stating the retailer “can thrive in these difficult times” given its multi-channel and multi-brand offering.
Meanwhile, B&M was upgraded to Buy over a month ago at Goldman Sachs. Richard Edwards, analyst at Goldman Sachs stated that trading down activity is now benefitting B&M and autumn trends are reflecting underlying improvement.
Marks & Spencer shares have risen 28% over the last three months. The stock was recently resumed with an Equal Weight rating at Morgan Stanley, with analyst Izabel Dobreva stating that food spending is generally resilient but faces a tug of war “against wage and energy pressures.”
Many UK retailers could benefit from the “golden quarter” although after an already difficult year for consumers, reduced consumer spending may be a possibility over Christmas.
Recent data from Barclaycard data shows the number of transactions increased in 2022 by 5%. However, the total amount spent fell 0.8% as the cost-of-living crisis continues to eat away at consumers disposable income.
Next and B&M report their trading updates on the 5th January, JD Sports report on the 10th January and Marks & Spencer report on the 12th January.