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Retail

Brexit Uncertainty Curbs UK Retail Earnings Growth Potential: Moody’s

The earnings growth potential of UK retailers will be lower than those in continental Europe in 2018, following the uncertainty of Brexit, according to ratings agency Moody’s.

Overall, however, the organisation says that improved economic prospects in most European countries will support solid revenue growth and underpin a stable outlook for the retail sector.

It forecasts that specialist retailers’ earnings across Europe will grow 6.3% in 2018, ahead of food (+3.6%) and apparel (+3.2%) retailers.

"A rosier economic outlook for the majority of countries in Europe will offset fierce competition in many segments of the region's retail sector, underpinning median revenue and earnings growth of 3.0% and 4.1%, respectively, and supporting the stable outlook on the sector into 2018," said Vincent Gusdorf, senior analyst at Moody's.

Brexit Impact

UK retailers' earnings growth potential will be at around 3.1% in 2018, according to Moody’s, with the expectation that UK GDP growth will be lower than other large European economies due to the weakness of the sterling.

It adds that the squeeze on disposable income has affected consumer confidence and curbed discretionary spending, however, retail sales growth has ‘remained robust’ so far this year.

In the grocery sector, in particular, discount supermarkets Aldi and Lidl have continued their market share growth, while Morrisons, Tesco, Ocado, and Iceland are set to sustain earnings growth momentum.

The ratings agency concludes that focusing on convenience and/or value is increasingly the best strategy for retailers.

© 2017 European Supermarket Magazine – your source for the latest retail news. Article by Sarah Harford. Click subscribe to sign up to ESM: The European Supermarket Magazine.

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