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In the run up to Christmas, is retail looking like a good investment?

23/12/2021

It is safe to say that the last two years have been a struggle for many in the retail sector. A combination of both lockdowns and fears over financial security have meant that both online and offline retailers have struggled to achieve both the volumes and values of sales they may have expected in previous years. 

But does this mean that investors should avoid the UK retail sector altogether? 

 

Positivity from the CBI

In late November, the CBI reported a large upward swing in sales volumes – particularly for clothing retailers and department stores. While year-on-year retail sales growth increased in November, online sales fell for the first time since they were included in the survey in 2001. 

Retail selling prices increased at a rapid pace and employment in the sector showed a significant rise, while both investment intentions and overall optimism in the sector also increased. 

Ben Jones, Lead CBI Economist, also stated that “cost pressures remain a very real concern, however, with selling prices growing at the fastest pace since 1990”. While most of the report was positive, does this translate across the entire retail sector? 

 

Retail fund sales and online shopping woes

The picture is not 100% rosy. The Investment Association reported that in October retail fund sales sank to their lowest level since September 2020.

Bricks and mortar retailers have also reported struggles, with, for example, the former owners of Glasgow’s Silverburn shopping centre selling up for half their asking price.

Some retail sectors are likely to fare better than others, however – even with the threat of Omicron looming over us. Last October, we wrote a piece on investing in supermarket shares, and the picture seems similarly rosy now for the UK’s major supermarket chains. Tesco has seen its share price skyrocket over the last year, while rumours of a private equity buyout have done the same for M&S. 

While the outlook for the retail sector may still be unpredictable, that’s not to say that the entire sector will be negatively impacted by Covid, Brexit and more. 

 

“Stable Rise Limited is not authorised or registered by the Financial Conduct Authority. The marketing materials are not intended to provide financial advice nor promote any individual financial products.”

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