Retailers across the UK have been left to ponder an uncertain future following the country’s shock vote to leave the European Union.

As businesses begin to come to terms with the potential ramifications of Brexit, Liberum analysts Tom Gadsby, Wayne Brown and Adam Tomlinson reveal their retail winners and losers.  



Asos is a clear winner post-Brexit, with translation benefits from overseas earnings into the weaker reporting currency [British Sterling].

Margin gains are likely to be invested in price and in the customer proposition, through later cut-offs for next day delivery, more free delivery and returns, so the benefit is likely to come through sales.

We upgrade sales growth forecasts for the US by 3% for 2017 and 2018 and in the EU by 2%, which drives modest earnings per share upgrades of 2% by 2018.


B&M is one of the highest quality names in the retail landscape. It has a superior disruptive multi-price model, which should, in a period of uncertainty, lead to out-performance.

The group has a strong track record of managing exogenous shocks and, while we take a prudent view to forecasts, there are multiple levers for these to be beaten.

Simplistically, B&M benefits from higher average transaction values in more prosperous times, while footfall and volumes rise as consumers trade down in a more uncertain climate.

Historically, the group has managed to offset headwinds through supply renegotiations, product and line optimisation and utilising pricing where it has a structural advantage.

This multi-pronged approach across multiple categories and multiple price points is a powerful combination to support margins and mitigate potential headwinds.


Boohoo’s sales should benefit from the weaker sterling rate on translation from its Euro and US businesses, which should help off-set pressure on cost of sales.

International sales are forecast to grow 105% and account for around 44% of group sales by the end of 2019.

The translational benefit from the US revenues should more than compensate for the 30% hike in cost of goods bought in US dollars.

While it is likely that margin gains are to be re-invested in price, the consumer outlook is uncertain and this has lead us to trim our growth assumptions. We now forecast UK growth of 20% from 25%, and maintain our three-year average growth estimate in the EU and rest of the world growth of 22% and 30% respectively.

We assume some margin erosion in the UK reflecting investment in price, but this is in-line with strategy.

Hotel Chocolat

Hotel Chocolat is a highly disruptive business and has proven defensive attributes irrespective of the economic backdrop, in our view.

Firstly, the customer base is largely UK, low ticket products and a large portion of its customers are in the ABC demographic.

Hotel Chocolat has a high growth online business and a very “sticky” core membership in its Tasting Club.

The group has a proven track record of taking advantage of opportunities having more than doubled its estate during the 2007-2012 downturn.

The group has just started its capital investment programme to increase capacity, automation and improve efficiencies in its manufacturing plant, which will drive significant margin enhancement over the next few years.

With strong cash generation and low debt, Hotel Chocolat has to be one of the best placed companies under our coverage.

Majestic Wine

We believe Majestic Wine is well placed in a post-Brexit environment.

Firstly it has a high growth business in Naked Wines, which will account for around 40% of group revenues by 2019.

Not only is it well placed from a structural growth perspective, but the combination of high rates of return on capital as well as a growing proportion of overseas earnings, is highly attractive. We estimate that by 2019 20-22.5% of group revenues – or rather 50% of Naked Wines sales – will be generated in the US and Australia.

The Majestic Wine management team are investment minded. A softening economic backdrop could provide greater market share opportunities through maintaining current investment spend in an environment of falling marketing costs.



We see little scope for meaningful organic growth at Burberry – US and Asian markets will remain tough for retail. Wholesale orders will remain slow too, in our view. We believe that little of the targeted cost savings will reach the bottom line.

At the time of its full-year results in May, Burberry indicated a £50m foreign exchange market tailwind in the current year.

Following the fall in the pound since Brexit, we have increased our full-year Forex benefit in retail from 4% to 8% and in wholesale from 2% to 3%, implying a 6% increase in full-year earnings per share.

Card Factory

Card Factory’s disruptive value proposition has taken its volume market share from less than 5% in 2004 to around 30% currently. Vertical integration supports best-in-class margins, high returns and strong cash generation.

The key question for investors is whether this more than compensates for potentially low single-digit earnings per share growth, albeit supported by a further eight years of store roll-outs.

Around 90% of the company’s single cards are sold for under £1.These low price points on high-quality products could protect revenue in times of weaker consumer confidence, when spend is likely to be diverted away from larger discretionary items.

In addition, consumers may place a greater focus on value, which plays into Card Factory’s hands.

That said, the company is not immune to the trend of declining high street footfall. We prudently lower our like-for-like growth assumptions to 1% in its 2017 financial year and 1.75% in 2018.

Major competitors, who predominantly sell third-party product, could well suffer more, as we suspect they primarily source in US dollars. This may require them to raise prices to protect margins.


A weak set of preliminary results in its 2016 financial year highlighted the potential for top line volatility.

Near-term uncertainty around consumer spending adds further to this risk, combined with gross margin pressure from a weaker Sterling and continued additional investment for growth under the new management’s strategy.

Fragile consumer confidence means we take a prudent view, reducing our like-for-like growth assumptions to 0% in the 2017 financial year and an increase of 1% in 2018.

We acknowledge the defensive product areas (car maintenance accounting for 33% of sales), but see higher spend, discretionary areas cycling and car enhancement – which together make up 56% of sales – as being more threatened.

Marks & Spencer

We cut our forecast like-for-like sales in M&S’s UK clothing business from a 3% drop to 5% in the current year to reflect weaker demand, and from 2.0% growth next year to flat.

We also cut current year UK food like-for-like sales from a 0.5% increase to flat.

With a 60% exposure to US dollars in its general merchandise division, we have added £50m to the cost of sales for UK clothing in 2018 and have added £100m to the cost of sales in 2019 on the same basis.

Pets at Home

Reflecting on its preliminary results and Brexit risks, we believe near-term headwinds have strengthened.

Performance in its 2016 financial year suggested that revenues may be more volatile than we had expected and margin expansion has likely been pushed further out.

We still acknowledge the company’s strong market shares, improving multi-channel offer and the longer-term growth opportunity in services. However, we see further downside risk before the shares make any substantial gains.

Further, post Brexit uncertainty may see consumers trading down or seeking greater value, in particular through online competitors.

Reflecting this, we lower our like-for-like merchandise growth forecasts to 0.5% for the 2017 financial year and 2% for 2018.


Poundland shares have risen from a low of 139p on 18 April and, aside from the potential bid from Steinhoff, we feel that the shares could fall to this level or below.

The outlook is uncertain, input costs are rising materially and Poundland has limited flexibility to offset these, when compared to B&M.

Today’s forecast changes in earnings per share are partly in response to an uncertain economic environment and what could be a weakening in consumer demand in a post Brexit economy.

Poundland buys between 30% and 38% of its own label and general merchandise products from China and this represents around $160m in costs of goods sold per annum.

The last year has seen the acquisition of 99p Stores and the integration of that business has for many reasons not gone smoothly. We reflect the majority of the £25m incremental EBITDA through our forecasts, but remain mindful that footfall dynamics on the high street may not be kind to Poundland if there is a deterioration in spending patterns.