UK retail stocks came under pressure on Tuesday (26 Aug) after analysts at Deutsche Bank downgraded the sector citing an anticipated slowdown in consumer spending.
The analysts highlighted discretionary spending growth falling to 3% in the second half from 7% in the first half, which was buoyed by sunny weather.
The bank believes the back end of 2024 and the first half of 2025 may turn out to be a peak in consumer strength as real wage growth and unemployment fears rise.
Home improvement company Kingfisher (KGF) and Primark owner Associated British Foods (ABF) were the biggest fallers in the blue-chip FTSE 100 index, dropping 5% apiece, after Deutsche Bank lowered its rating on the two firms to Sell from Hold.
Mid-cap home improvement company Wickes (WIX) was the biggest victim in the FTSE 250, falling more than 9% after the German bank also cut its rating to Sell from Hold and lowered its target price to 195p from 205p.
The bank kept its Buy rating on homewares retailer Dunelm (DNLM) while increasing its price target to £13.60 and nudged up its price target on Next (NXT), maintaining a Hold rating, although the respective share prices drifted lower by 1.5% and 0.6%, respectively.
Despite the setback in the share prices, both companies remain well ahead of the FTSE 100 index year-to-date with gains of 25% and 15% compared to the 12% advance in the blue-chip index.
