Important information: The value of investments and the income from them, can go down as well as up, so you may get back less than you invest.
US shoppers have given the country’s retail sector hope by fuelling a 17.7% rise in consumer spending last month. The record monthly gain comes on the back of plunging declines in retail sales recently, brought on by coronavirus lockdown measures.
But, there’s still a considerable journey back to normality ahead. Spending in the country is still around 6% down year-on-year, with the unemployment rate sitting just above 13%. Getting people back to full-time work will be the first hurdle in bringing retail sales figures back in line with previous trajectories.
With global funds increasingly exposed to the recovery in US shares since 2008, especially in the thriving tech sector, UK investors will be more attentive than ever to signs of the shape and speed of this recovery and the return of the nation’s spending.
While today’s figures are a short-term boon overall, the pace and direction of recovery is likely to highlight the change in consumer behaviour already on show before the virus struck. Online firms saw the majority of renewed spending come their way, with sales up more than 30% on the year. Clothing stores were less fortunate, with volumes coming in 60% lower than a year ago.
US clothiers have been some of the worst affected companies, with more pronounced declines than many other sectors, mirroring some of the high street woes seen on this side of the pond over the past few years.
UK retail sales figures out later this week will give an idea of how the likes of furlough pay and store closures have hit retail spending here, as well as any glimpses of recovery. New data from the Office for National Statistics shows more than 600,000 people in the UK have lost jobs since March - while the broader unemployment rate stands at 3.9%, spending will have to contend with job cuts and the end of the furlough scheme here too.
However, on the corporate side some firms are using the current inflection point to increase their own presence before we fully get back to the shops. Reports this morning of Boohoo’s plans to snap up collapsed brands Oasis and Warehouse, follow the online fast fashion house‘s acquisition of Coast and Karen Millen last year.
Pouncing on beleaguered high street names might just be the Pretty Little Thing-owner’s version of being greedy when others are fearful. With an enviable online reach and capital-light operations already placing it at the forefront of investors’ views of the future of retail, these recent acquisitions could be a sign of further empire-building.
But, for investors it pays to remember that stories like Boohoo’s, however well-managed or serendipitous, are only one of many playing out right now. Not only are sectors likely to diverge as our habits continue to change, but fortunes within those sectors are up for grabs too.
Never has it been more important to make sure the companies in your portfolio have strong balance sheets, comfortable cash reserves and nimble management, able to affect positive change efficiently.
There is still a long way to go until normality resumes, at the very least we need our companies to be here when it’s over.
Important information: Investors should note that the views expressed may no longer be current and may have already been acted upon. Overseas investments will be affected by movements in currency exchange rates. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser.