Get 40% Off
🚨 Volatile Markets? Find Hidden Gems for Serious OutperformanceFind Stocks Now

StockBeat: Sainsbury, B&M Show Pockets of Value in Stressed Retail Sector

Published 07/01/2020, 05:22 AM
Updated 07/01/2020, 05:27 AM
© Reuters.

By Geoffrey Smith 

Investing.com -- For the last four months it’s been accepted wisdom that if you have to be invested in retail, then make it either in e-commerce or in companies that trade in basic necessities like food.

This week’s updates have re-affirmed that wisdom.

Certainly, it seems that there is little point in waiting for the release from lockdown to revive the U.K.’s beleaguered shopping malls.  Over the last week, one of the U.K.’s two biggest retail landlords, Intu Properties  (LON:INTUP), has appointed administrators, while the other, Hammerson (LON:HMSO), said on Tuesday it was still – just – able to keep within debt covenants having successfully negotiated with its lenders to shift the goalposts a bit.

And the future still looks decidedly grim for retailers who depend on commuters and tourists. SSP Group (LON:SSPG), the operator of brands such as Upper Crust and Ritezza that are staples of railway stations and airports, said Wednesday it is planning to cut 5,000 jobs. It noted that U.K. train passenger numbers have fallen 85% from pre-pandemic levels.

That business isn’t coming back any time soon. While the opening of so-called “air bridges” to the rest of Europe will allow a degree of tourist footfall at airports, “long-haul travel is anticipated to remain at extremely low levels,” the company said. Additionally, “with the current social distancing measures remaining in place, the recovery in passenger numbers in the rail sector is expected to be prolonged.” 

The group said it expects only 20% of its outlets to be open by the autumn.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads .

But things look a lot better in the grocery store business, where J Sainsbury (OTC:JSAIY) reported an 8.2% rise in comparable sales in the 16 weeks through June 27. Online sales doubled, helping to defend market share even if the associated costs of ramping up its delivery infrastructure kept a lid on profitability. The company was still cautious about the outlook for the second half of the year, noting that its figures were being flattered not only by stockpiling, but also by the good weather since lockdown restrictions were eased.

Sainsbury shares were trading unchanged by 5:15 AM ET (0915 GMT), while SSP Group shares were down 2.2%. SSP shares, like those of WH Smith (LON:SMWH) which trades on the same model, have failed to make any meaningful recovery from the March lows and are still down over by between 50% and 60% year-to-date.

Wednesday’s star performer, however, was from a part of the retail sector that can reasonably be expected to thrive in the next year or two. B&M European Value Retail (LON:BMEB), which operates discount shops around the continent, said comparable sales rose 28% in the three months to June. U.K. sales rose 34%. With unemployment soaring, and incomes falling even for those who can avoid the worst, that’s a trend that seems likely to continue. B&M European Value Retail shares rose 5.1% and are now up 2% since the start of the year.

Latest comments

positive news in a negative light.. what a bunch of misdirectors
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.