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Deutsche Bank turned more positive on UK retailers on Tuesday. The firm said its proprietary UK discretionary spending analysis highlights robust income growth. There is also an expectation for a sequential improvement in consumer confidence. “With consumer confidence stepping up during Q2, political certainty, and inflation under control, we expect UK discretionary spending will better track earnings growth in the next 12-18 months,” noted analyst Adam Cochrane.
Looking across the UK retail sector, Deutsche Bank upgraded Kingfisher plc (OTCQX:KGFHF) (OTCQX:KGFHY), Currys plc (OTCPK:CURYY) (OTC:DSITF), and Moonpig Group (MNPGY) to Buy ratings after all three were slotted with Hold ratings.
The view on Currys (OTCPK:CURYY) is that the retailer took significant self-help measures during FY24 to preserve cash, stabilize the balance sheet, and protect margins against a backdrop of soft demand. Currys is seen as well-placed to benefit from improving electronics demand. Meanwhile, Moonpig (MNPGY) is seen as an attractive opportunity for gaining exposure to an increasingly confident consumer. Within the UK retail sector, Deutsche Bank is also positive on AO World, B&M, Marks and Spencer Group plc (OTCQX:MAKSF), and Victorian Plumbing.
Last week, 14 years of Conservative rule ended in the U.K. after the Labour Party won the U.K. general election by a landslide, with Keir Starmer becoming the new prime minister. It’s considered a big shift for Britain’s political landscape, which has dealt with a tumultuous decade that has included Brexit, a cost-of-living crisis following COVID and the war in Ukraine, as well as four Tory prime ministers in the past five years.