CLICK HERE FOR THE FULL REPORT

EXECUTIVE SUMMARY
Introduction:

The end of lockdowns resulted in an increase in the number of leisure options – holidays, in-store shopping, restaurants, and pubs were now available. More things to spend money on, creating a tougher fight for share of wallet.

High inflation and rising energy costs have put a squeeze on disposable incomes, causing demand to shift in response.

Companies with certain traits (the ‘Unholy Trinity’) appear to be more vulnerable in the current macroenvironment. These are:

• Recent IPOs
• Online-only retailers
• Big Ticket/highly discretionary retailers

Food Delivery:

Delivery spend is being cut by consumers as it is being perceived as an area where they can tighten the belt. It has remained above its pre-pandemic levels but continues to trend downwards as a percentage of restaurant sales.

This downward trend could put a dent in the hockey stick chart, delaying profitability.

The threat of new entrants, particularly in the most popular micro markets, does not look like it will abate in the short term. Restaurants are also offering stiff competition, trying to turn app users into in-restaurant visits using loyalty schemes.

Online Retail:

Surveys are showing that consumers are planning to save money long term by spending less on clothes for themselves, as disposable incomes reduce. Online sales are more vulnerable than in-store sales, and are falling faster, according to the ONS.

Market visibility is currently poor. The next 6 months look very challenging for online clothes retailers as energy costs soar.

FULL REPORT HERE

Hobbyists:

An increased amount of leisure options post unlockdown caused demand to disperse, with more places to spend money. At the same time discretionary income is being reduced, with necessities taking a larger share of spend. Subscription service models are firmly in the crosshairs for consumers who are chasing savings.

Big Ticket:

Reductions in disposable income gives consumers an incentive to delay large purchases (as they believe they can do so without adversely impacting their standard of living) to have more cash to cover food and necessities. Therefore, demand tends to tip, rather than fall gently.

Car dealers have benefited from windfalls on existing stock, but windfalls are not permanent. Demand looks uncertain in the near term, and if global supply chains are re-established, then the extranormal margins in this area will recede.

CLICK HERE FOR THE FULL REPORT

James Brumby

james.brumby@langtoncapital.co.uk