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Investing.com -- UK consumer spending increased by 1.6% year-on-year in the four weeks ending February 7, with the growth primarily driven by older consumers and online purchases, particularly in discretionary goods and services, according to Barclays’ findings.
Citing its proprietary Barclays (LON:BARC) UK Spend Trends 2.0 signals, the investment bank said the spending uptick was observed across most sectors, with Digital Content, Other Retail, and Travel experiencing the most significant increases.
On the other hand, sectors such as Motoring (excluding Fuel), Fuel, Hardware & DIY, and Clothing Retail saw declines.
Despite the recent growth, Barclays anticipates a slowdown in the coming month. Utilizing machine learning models, the bank predicts that spending growth will decelerate to just 0.3% year-on-year in the four weeks ending March 7, 2025, due to tougher year-on-year comparisons.
“Within the mix, we forecast discretionary to continue to outperform non-discretionary,” Barclays strategists added.
Among sectors, Other Retail, Travel, Digital Content, and Leisure are projected to perform strongly, while Motoring (excluding fuel), Hardware & DIY, and Clothing Retail are expected to be the weakest.
In terms of individual companies and fundamental implications, Barclays notes the resilience in Travel spend through 2024 and into 2025, especially among more affluent, older consumers.
This trend is seen as positive for companies such as International Consolidated Airlines Group S.A. (LON:ICAG) and easyJet (LON:EZJ), as well as tour operators like Jet2 PLC (LON:JET2) and Tui AG NA (ETR:TUI1n), which have significant exposure to the UK market.
Conversely, the Clothing Retail sector is experiencing softer trends, with ASOS (LON:ASOS) and Boohoo (LON:BOOH) facing accelerating declines in spending, down 2.9% year-on-year for the period ending February 7, 2025, compared to a 2.3% decrease previously.
“The environment continues to look challenged for ASOS/Boohoo, in our view and we remain cautious on the UK online fashion players until we start to see more evidence of a top-line inflection,” strategists said.
The competitive landscape in the UK fashion market remains strong, with companies such as Shein, Temu, TikTok Shop, and Vinted posing a high level of competition, particularly for Boohoo and ASOS.