Earnings upgrades in sight as retail sales hold their own

Good weather and promotions helped retail sales climb 1.4 per cent like for like and total sales advanced 3.2 per cent, the monthly BRC-KPMG Retail Sales Monitor showed.

Many general retailers achieved a better month – clearance Sales, for example, lifted clothing retailers’ performance – and food sold well, although easing inflation meant growth in that sector was lower than in May.

Numis analyst Nick Coulter said: “The statistics represented a solid turn-out and run rates should continue to benefit from progressively easier comparatives as we begin to annualise the crunch.

“With respect to the sector, while the names have pulled back in recent weeks, retailers have held their own on a relative basis and we see scope for earnings upgrades to sustain this performance.”

Although Sales helped fashion groups’ performance, Coulter observed: “For the most part we believe the quoted names will have benefited from sun-driven demand at full margin.”

Pali analyst Nick Bubb said: “The overall comparative for June was weaker and against that we expected to see some modest growth, perhaps 0.2 per cent
overall, but the outcome was better than expected.”

But Investec analyst Natalia Marisova remained circumspect about retailers’ prospects. She said: “With sales still driven by promotional activity across most categories, we believe this month’s reading indicates little improvement in underlying trading patterns.”

Hard-pressed big-ticket retailers, whose recovery would indicate improving consumer confidence and a widespread retail recovery, continued to find the going tough.

BRC director-general Stephen Robertson said: “The sun knocked sales of big-ticket items such as furniture and homewares.

Given the uncertainty about jobs, customers are still nervous about spending on more expensive non-essentials.”