Daily Brief: If You Think UK Retailers Have Omicron Cornered, You’d Best Bet Again

Daily Brief: If You Think UK Retailers Have Omicron Cornered, You’d Best Bet Again

about 2 years ago3 mins

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Data out on Friday showed that UK retail sales fell by more than expected last month, but the odds weren't exactly in their favor…

What does this mean?

December was never going to live up to November’s bumper growth in retail sales, especially after an Omicron-driven surge brought a whole new wave of restrictions and jitters. But even then, those sales were down 3.7% in December from the month before – a long way off the 0.6% drop economists were expecting, and the biggest since the start of the country’s third lockdown last January. They were down across the board too, with spending in clothing and sports stores falling 8%, furniture stores 3%, and gas stations 5%. It could be worse, mind you: UK retail sales were still 2.6% higher than they were before Covid kicked in.

UK retail sales
Source: The Guardian, ONS

Why should I care?

Zooming in: It could be a hard year.

A lot of countries are dealing with rising prices right now, it’s true, but Brits might have a particularly tough time ahead. For one thing, the government’s already moving to claw back the cash it spent during the pandemic, starting by raising taxes in April in a bid to raise £14 billion ($19 billion) this year. And for another, the Bank of England is expected to hike interest rates again next month – a move that’ll make it even more expensive to borrow what they need.

Poorer overnight

The bigger picture: It could be a really hard year.

Given all that, it's no wonder UK consumer confidence – a measure of how settled shoppers are with their personal finances and the wider economy – just hit its lowest level in almost a year, according to data out on Friday. In fact, KPMG thinks as many as a third of shoppers won’t buy as many nice-to-haves this year as they did last. And since it’s those “consumer discretionaries” that drive so much economic growth, it doesn’t bode well for the country’s recovery.

UK consumer confidence

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More SPACs Are Calling It Quits On Their Stock Market Listings

SPAC image

SPACs, we hardly knew ye: data out on Friday showed that more and more special-purpose acquisition companies (SPACs) are calling off their stock market listings.

What does this mean?

Forget NFTs, ARK, and HODL: SPACs – listed companies that buy unlisted companies to fast-track their arrival on the stock market – were the all-the-rage acronym of 2021. They even raised more money than initial public offerings for the first time last year. But the fire that burns twice as bright burns half as long: investors have been abandoning them on the back of more regulatory scrutiny, not to mention a shoddy performance that’s seen one SPAC-focused index fall 40% from its all-time high. That tears it: seven US SPACs that planned to collectively raise more than $2.5 billion have canceled their planned listings this year – almost as many as pulled out in the whole of 2021.

SPACs shy away

Why should I care?

The bigger picture: SPACs save face.

The execs behind those SPACs might have preferred the short-term embarrassment of calling it quits to the long-term pressure of trying to find a deal. A SPAC, after all, generally has to strike a deal within two years of listing on the stock market, or else give investors back the money they paid. That means it’s often left scrambling to acquire mediocre companies or overpay for half-decent ones, typically at the expense of investor returns. Singapore might realize this soon enough: the country – which is trying to position itself as the SPAC hub of Asia – just listed its second-ever SPAC on its stock market on Friday.

For you personally: Ditch the stay-at-homes.

You might notice a lot of these post-Covid fizzle-outs in 2022. Take American companies Zoom, Docusign, and Peloton, all of which are down more than 50% from the highs of the last couple of years. They had a captive audience during the pandemic, but virtual meetings, virtual notarization, and virtual exercise aren’t worth nearly as much in a face-to-face world.

Netflix and Peloton stock
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