UK Retailers/Iceland - comments

Listening to Sainsbury and Tesco’s analysts calls, as well as reading through the Poundland announcement this morning, the take away is that the good times continue to roll for UK retailers. With the Omnicron variant curbing UK citizens celebrating the Christmas period externally, UK retailers have maintained the elevated sales figures. Forward-looking comments from both management teams are less cautious than previously, and although acknowledging cost pressures on wages and supplier constraints, they expect supplier constraints to mitigate as they progress through 2022. The big unknown in UK retailers is the overall market size going forward, in a post-Covid world. All projections are contingent on assumptions on customer habits. Both retailers are now expecting the base (covid adjusted) UK market size is likely to be higher as customer habits have changed and unlikely to revert to pre-2020 levels. So although top-line sales are going to decline in FY22, they should exceed FY19 levels.