The UK retail sector is in focus this week, with high street favourites due to report, while economic data should also shed some light on consumer activity.
There have been some brighter spots in UK economic data over the past month, with Office for National Statistics (ONS) data released last week showing stronger-than-expected UK economic growth of 0.7% in the first quarter, versus estimates of 0.6%. This was also a marked improvement on the 0.1% growth recorded in the fourth quarter.
Meanwhile, separate data from the British Retail Consortium (BRC), also released last week, showed UK total retail sales rose by 7% year-on-year in April, well ahead of the 12-month average growth of 1.4%. The UK retail trade association said the sunniest April on record prompted strong consumer spending, while Easter falling in April this year also helped boost retail sales.
"The sun has been shining on the high street in recent months, as the warmer weather has prompted shoppers to spend money entertaining and refresh summer wardrobes," said Susannah Streeter, head of money and markets at Hargreaves Lansdown.
"The British Retail Consortium also noted a trend for DIY and garden focused sales, as people spruced up their outdoor spaces."
She said that the Bank of England's recent 0.25% interest rate cut – which lowered the base rate to 4.25% – was "also likely to have helped sentiment among consumers, and with borrowing costs on a downwards, if slow, trajectory, it could help push sales in the right direction in the months to come."
"The trade deals signed with the US, India and the EU may also help restore some confidence about the direction of the UK economy, which could increase consumers’ appetite to spend," Streeter added.
At the same time, she said: "Higher revenues won’t translate automatically into better profits for the retail sector. Rising employer taxes, due to increases in national insurance contributions, are likely to weigh on the bottom line."
These are all important factors to consider as more high street names report this week, helping round off this latest earnings season, along with the latest UK inflation print due out on Wednesday and ONS retail sales data on Friday. With that in mind, here's more on what to expect.
UK total retail sales rose by 7% year-on-year in April, well ahead of the 12-month average growth of 1.4%. ·Mike Kemp via Getty Images
Retail stocks in focus
Before diving into this week's retail earnings, it's worth taking stock of performance from the sector so far this season, as a number of major UK retailers have already reported.
This includes supermarkets Tesco (TSCO.L) and Sainsbury's (SBRY.L), which both reported in April.
Hargreaves Lansdown's Streeter said that Tesco "issued some weak profit guidance for the current year that disappointed the market but given its huge scale and deep-rooted relationships with suppliers, [it is] still in a highly competitive position."
Meanwhile, Sainsbury's has been "punching above its weight in the supermarket sector," she said, delivering a good set of full-year results, with revenues growing nearly 2% to £32.8bn and profit after tax up 76.6% to £242m.
"Sainsbury continues to scoop up market share, in large part due to a herculean effort to improve products, value perception and innovation more generally," Streeter said. "This should stand it in good stead if price wars do break out, as has been expected, among grocers."
Elsewhere, Primark-owner Associated British Foods (ABF.L), reported half-year results at the end of April. Streeter said that 1% sales growth to £4.5bn "didn’t impress investors ... with a weak performance on home soil only offset with expansion overseas."
"But there are some sector wide signs that fortunes may have improved as the seasons evolved," she added.
Next (NXT.L) posted a better-than-expected first quarter, in results published earlier in May, with full-prices sales up 11.4%, which was £55m ahead of its forecast for the period.
"Warm, dry weather also gave clothing a lift, something noted by Next in its latest trading update, although its boss, Lord Simon Wolfson, suggested the sunshine may have pulled forward some demand from later in the year," said Russ Mould, investment director at AJ Bell (AJB.L). Even so, Next raised its guidance for profit before tax for the year by £14m to £1.08bn.
Turning to this week's retail releases, Greggs (GRG.L) is due to report on Tuesday morning. While the bakery chain said sales had topped £2bn for the first time and posted record profits in its preliminary annual results in March, the company also reported a further slowdown in sales at the start of the year.
"Chief executive Roisin Currie had cited rotten weather in January and February as part of the problem, but that will not stand up this time and Greggs’ take on wider high street footfall should be informative," said Mould.
"Take-up of the delivery proposition and volumes in the evening will be of particular interest, as will pricing strategies designed to cover wage and input cost inflation in what remains a highly competitive arena, and one where new initiatives such as chicken goujons bring Greggs into areas that are already well served."
Much of the market focus this week will be on high street stalwart Marks & Spencer (MKS.L), as it reports in the wake of a cyber attack that left the retailer with some empty shelves in its stores and online orders suspended.
Shares in M&S are down 12% over the past month and investors will be keeping a close eye out for any commentary from leadership on how the company is dealing with the fallout of the cyber attack.
"M&S looked on track to maintain its hard-won momentum in both food and clothing until the cyber-attack struck," said Mould. "Insurance cover will lessen the immediate financial blow, and management’s careful, considered handling of the situation means reputational damage is very limited at the stage. Whether boss Stuart Machin feels able to give much guidance is open to question."
M&S is due to report on Wednesday, with analysts forecast a 5% increase in total group sales to £1.38bn, according to AJ Bell. Adjusted pre-tax income is expected to come in at £850m, versus £716m a year ago.
Sports apparel retailer JD Sports (JD.L) is also due to report full-year results and offer an update on first quarter performance on Wednesday.
The retailer, which sells brands such as Nike (NKE) and Adidas (ADS.DE), gave investors a glimpse into what to expect in a trading update in early April. The company said it had generated 5.8% organic revenue growth for the year, while profit before tax and adjusting items was expected to be in line with guidance of £915m to £935m.
JD Sports also indicated that the 2026 fiscal year had gotten off to a solid start, as it said trading to the end of March had been in line with expectations. The company said it expected profit before tax and adjusting items to be in line with consensus estimates, but warned its guidance excluded the potential impact from changes to US president Donald Trump's tariffs.
Mould said that JD Sports’ share price "still feels linked, for better or worse, to that of Nike and the latest dud outlook statement there, plus one from athleisure provider Lululemon (LULU) leaves questions unanswered about the wider market here.
"Consensus estimates have leaked lower, to below £900m on an adjusted pre-tax profit basis for the year to January 2026, even though JD Sports had declared itself happy with the prevailing analysts’ view of something around £920m to £940m, or flattish against the fiscal 2025 outturn that will be revealed by these full-year results."
UK inflation
On the economic data front, the ONS is slated to release the latest UK consumer price index (CPI) reading – a key measure of inflation – on Wednesday morning.
CPI rose by 2.6% in the year to March, which was down from 2.8% in February. The gradual easing of inflation back towards central banks' 2% target has helped cement the Bank of England's (BoE) case for lowering interest rates.
However, Deutsche Bank (DBK.DE) senior economist Sanjay Raja said in a note on Friday that despite an "encouraging March report, the April inflation will present the biggest test for the MPC [monetary policy committee] so far this year."
He pointed to increases in energy and water bills, as well as to vehicle excise duty, social housing costs, council tax bills (for RPI), air passenger duty, communication bill resets and even a later than usual Easter weekend, as adding to price momentum.
"We think food, core goods and some services (particularly, hospitality and leisure) prices will be most impacted," he said.
As a result, Deutsche Bank expected a "big step up" in price momentum to start the second quarter, estimating that headline CPI would rise to 3.4% in April.
UK retail sales
Another key data release from the ONS this week is its April retail sales data, which is due out on Friday morning.
March figures, published last month, showed retail sales were estimated to have risen by 0.4%, which was down slightly from 0.7% growth in February.
The ONS said clothing and outdoor retailers reported that good weather boosted sales but that this was partly offset by falls in supermarket sales.
In a note released on Thursday, Barclays' (BARC.L) investment sciences team said that their data indicated UK consumer spending was up 1.5% year-on-year over the four weeks to 2 May.
However, they said that the team's machine learning model forecast spending growth to rise by 3.9% year-on-year over the next four weeks.
"Across sectors, we forecast digital content, other retail, travel, and leisure to stand out strongest, while motoring (excluding-fuel), hardware & DIY, and home & electronics are forecast to decrease," the Barclays team said.
Caution in April
Turning back to the previous month, AJ Bell's Mould said that many consumers may have approached April with "some trepidation, given higher council tax bills, higher water bills and the increased energy price cap. That explains why the GfK consumer confidence reading has largely stalled of late."
“But there is still some good news out there," he added. "The price of oil is weak and that could filter through to the energy price gap come July, while interest rates are slowly coming down and the stronger pound will help put some form of lid on imported inflation.
"Increased price competition between the leading supermarkets will be welcome too, while wage growth continues to outstrip inflation quite handily and unemployment remains relatively low."
