Moody’s has suggested that British retailers will be surpassed by their European rivals in 2018 as disposable incomes are squeezed by decreasing wage growth and a comeback of inflation.
Despite robust retail sales growth in 2017, the credit rating agency has warned that it expects high street bellwethers Marks & Spencer and Next to experience “anaemic growth or even a contraction of earnings” in 2018.
Analysts at the credit rating agency predict that these retailers will “continue to face a challenge to retain their market shares and maintain profitability levels against the combined onslaught of a broad range of competitors, including value-focused Primark, international fast fashion retailers like H&M and Zara, relatively new but rapidly growing names such as Superdry and online specialists Asos, Boohoo and Missguided.”
In its research of European retailers, only the UK retail names are listed as losers for 2018. House of Fraser, Debenhams, Marks & Spencer, B&Q owner Kingfisher, Next and New Look are all predicted to produce negative earnings.
B&M Bargains, the discount retailer, is the sole UK retailer forecast to boost earnings by more than 15pc in 2018.
“The looming prospect of interest rate rises will mean UK consumers continue to search for value and it will also curb any meaningful growth in discretionary spending,” stated Moody’s.
The agency predicts UK retailers to boost earnings at an average of 3.1pc in 2018, compared with the 5.2pc for their continental rivals.
Last month, higher clothing and food prices that were pushed up by the weak pound, fuelled UK retail sales growth. According to the British Retail Consortium and KPMG, like-for-like sales increased by 1.9pc in September which is far higher than the 0.4pc tha was recorded last year.