Retailers rise and pubcos slide after mixed data from BRC, Barclaycard

The BRC-KPMG report showed UK retail sales increased 1.4% in March on a like-for-like basis, improving from 0.6% in February and above the consensus expectation for a 0.1% decline. Year-over-year growth in total sales rose to 2.3%, from 1.6%.

Analysts highlighted that the comparatives from March 2017 were relatively soft, with total sales falling 0.2% and LFL sales were down 1.0%.

Over the three months to March in-store sales of non-food items fell 3.0% and 4.0% on a like-for-like basis. On a 12-month basis, the total decline was 2.2%.

Food sales increased 4.2% in the three-month period on a like-for-like basis and 5.3% on a total basis, which was the strongest since July 2009.

Barclays meanwhile showed consumer spending growth slowed well below the three-month average to 2.0% in March from 3.8% in February, well below the three-month average of 3.2%.

The heavy snow in the month led to in-store spending growth falling to -1.9% in March, the slowest rate of growth in almost six years. Online growth remained strong at 11.7% versus a three-month average of 12.0%, with online channels accounting for 30.0% of spending.

March was also one of the weakest months for pubs & restaurants, the Barclaycard data showed.

"On a short-term basis, this poor performance could create negative reactions in share prices of the pubs stocks as they update the market on trading," Barclays analysts said.

But they stressed this did not change their fundamental view on any stock, with a preference still for names where greater balance sheet strength is perceived, namely JD Wetherspoon and Greene King, rather than Marston's and Mitchells and Butlers.

Analyst Clive Black at Shore Capital said the BRC data supported his positive stance on supermarket groups, though he noted that the comparatives from March last year were relatively soft.

"Clearly the early Easter falling into March this year positively impacted sales which made up for the unseasonal weather earlier in the month. The growth in retail sales during March was despite the difficult weather at the start of the month, and again in the middle of March around St Patrick’s Day."

He added that the data on in-store sales highlighted the further channel shift to online but this was exacerbated as thebad weather dissuaded would-be shoppers from venturing out onto the UK high streets.

"This economic dataset continues to support our central investment themes. We continue to favour supermarkets, where the market expands faster than additional capacity. It will be interesting to see how sales values hold up now that inflation appears to have peaked. We continue to favour pure-play clothing retailers and the BRC data highlights that non-food online continues to gain share at pace.

"In non-food offline we continue to believe that this requires selectivity in investment decisions and we continue to favour good discount and credible self-help stories but the casualty list has lengthened materially in CY2018 as cost pressures, including business rates, and channel shift continue to take their toll. We are encouraged that living standards are stabilising as real wages are likely to grow ahead of inflation, although our euphoria is tempered by the potential prospect of a May interest rate rise."