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A new sales trend could be emerging among businesses in the UK
Thursday 17 Sep 2020 Author: Martin Gamble

Local high streets and out-of-town retail parks could see a resurgence as the public opts to either stay near to their homes for shopping and leisure activities, or to go somewhere with ample car parking space so they don’t mix with others in close proximity on public transport.

There are already signs that commercial city centres including London are suffering as working and travel habits change.

The latest Coffer Peach survey tracking the pubs and restaurants sector found in August that London saw a 13.4% like-for-like drop in sales and 28.1% overall fall, compared with a 7.9% drop outside the M25.

Associated British Foods (ABF) recently said UK sales for its Primark fashion chain since reopening in May were expected to be 12% lower on a like-for-like basis. However, by excluding its four large UK destination city centre stores, sales would only be down 5%.

Casino operator Rank (RNK) noted in a recent trading update that its venues outside of London achieved 75% of prior-year revenues which means they are operating with positive cash flow, in contrast to London where trading remains weak with revenues only hitting 40% of prior year levels.

The shift in activity away from big city centres could improve the earnings prospects of businesses already focused on out-of-town locations such as neighbourhood café and bar operator Loungers (LGRS:AIM) which had reopened all of its sites by 7 August. On 16 September it reported ‘significant market outperformance’ since reopening, adding that sales were positive even when excluding the impact of the Eat Out to Help Out scheme and VAT reduction on food and non-alcoholic drinks.

Similarly, pubs group Marston’s (MARS) with its focus on suburban locations and smaller towns may well see its earnings recover faster than rivals which focus on large cities.

The same case could be made for neighbourhood retailer McColl’s (MCLS) which has over 1,400 convenience stores spread across the UK. It recently reported that food grocery and alcohol sales had been particularly strong.

Value retailer of cards and gifts Card Factory (CARD) operates through a national chain of over 1,000 stores and is omnipresent in small towns across the UK, as well as having an online offering which management believes could treble by 2025.

‘The UK greeting card market has been flat, by value, at c.£1.3bn over the past three years and is forecast to remain so,’ says Liberum analyst Adam Tomlinson. ‘This is driven by the fact that card giving is engrained in British culture, with 76% of adults having purchased at least one card in the last year.’

Card Factory will reveal to investors whether recent business has been resilient

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