Investors are betting that tomorrow’s high street reopening will usher in a summer spending spree that provides a desperately needed boost to retailers, pubs and restaurants after a devastating year.
The FTSE 350 General Retailers Index, mostly made up of high street chains, closed at its highest level for almost five years on Friday after rising 48 per cent over the past 12 months. Meanwhile, hedge funds have been unwinding short bets — from which they stand to profit from falling share prices — placed against high street names during lockdown.
With almost half the population vaccinated and households sitting on about £140 billion of savings, hopes are rising that the bounce-back after a three-month lockdown will be far stronger than in previous reopenings. A YouGov survey last week found that 72 per cent of people felt comfortable visiting high street shops, up from about 40 per cent last June.
“There’s an expectation [among investors] that we’re in for a good summer. The glass is three-quarters full,” said retail analyst Jonathan Pritchard at investment bank Peel Hunt.
The timing of the reopening is expected to benefit clothing retailers launching spring/summer collections, while this summer’s European football championship will boost pubs as well as retailers selling TVs and football shirts.
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However, there are concerns that the recovery will be short-lived. “There will be a fillip [in demand] and it could be busy for the next couple of months, but we’ve got to be quite measured about how long it will last. It will depend on the economic fallout from the pandemic and that’s very difficult to judge,” said Pippa Wicks, executive director of John Lewis.
The Bank of England expects unemployment to peak at 7.75 per cent in the middle of 2021, up from 5 per cent, or 1.7 million out of work, in the three months to January.
Pubs and restaurants will be able to resume service outdoors tomorrow, although UKHospitality, the trade body, said constraints on outside space meant that only 48 per cent of pubs and 33 per cent of restaurants would reopen.
According to IHS Markit stock lending data, a proxy for short-selling, 2 per cent of shares in pub group Mitchells & Butler are currently sold short, down from 8 per cent in February, and 2.7 per cent of shares in The Restaurant Group, owner of Wagamama, are being shorted, down from 7.8 per cent. Short-selling in electricals retailer Dixons Carphone has fallen from 2.7 per cent to 0.3 per cent of shares outstanding, while 2.3 per cent of Marks & Spencer’s shares are shorted, down from 5.1 per cent last April. On average, short-selling across non-essential retail and leisure stands at 1.1 per cent compared with 2.7 per cent a year ago.
Listed retail, leisure and transport businesses have reinforced their finances by raising £1.5 billion in the first quarter, compared with £221 million a year earlier, according to analysis by Investec of Dealogic data. Among those raising funds were JD Sports and The Restaurant Group.
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•Data out on Tuesday will show that the UK is becoming more resilient to lockdowns, with gross domestic product expected to rise 0.8 per cent in February from January. That still leaves GDP 8.5 per cent lower than at the start of 2020.
M&S flags food woes
Marks & Spencer has been quietly softening up the City before its full-year results next month.
The retailer has been pointing analysts to data from Nielsen that shows its food sales fell by 5 per cent in the 12 weeks to March 27.
Despite launching with Ocado in September, M&S has been losing share to supermarkets that have expanded their online businesses by picking orders from shops. Ocado says its model is more profitable but its heavily automated warehouses cannot be scaled up quickly.
Simply Food stores in city centres and transport hubs have been hit by a reduction in footfall.
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Shore Capital, M&S’s house broker, forecasts full-year pre-tax profits of £24 million. Goldman Sachs upgraded its M&S profit forecast last week on hopes for higher online clothing sales.
