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Brits too busy to shop are a boost for UK convenience stocks
[LONDON] Brits are still spending money on groceries, but only when it suits their busy lives.
Consumers no longer want to spend two or three hours on a Saturday buying essentials for the week and prefer to visit stores more frequently to purchase fewer items, said Trevor Green, head of UK equities at Aviva Investors in London. He sees the pattern of shoppers combining online buying with convenience store trips continuing.
"This is all about people's view on time rather than price," Mr Green said.
"It's a long-term trend and it's running independent of consumer confidence or spending decisions."
Researcher IGD estimates that convenience sales in the UK grocery market will increase by almost 18 per cent to £46.2 billion (S$85.2 billion) in the five years ending 2022, compared with 5.9 per cent growth in supermarkets. Convenience will be the third-fastest expanding sector after online and discounters, according to IGD.
"The growth rate in convenience will continue to outstrip the grocery retail market overall, supported by changing shopper behaviour," Patrick Mitchell-Fox, a senior business analyst at IGD, said on Wednesday.
The shift is partly because of the increasing number of households with just one or two people, "but also reflects the significantly improved retailer capability developing in smaller formats".
Here's a look at some stocks that benefit from Britain's time-pressured consumers:
Tesco, Sainsbury: "The winners have to be Tesco and J Sainsbury because they have clear convenience investment strategies and have scale already," said Aviva's Mr Green.
"Convenience isn't just a lot of small stores, unbranded. Some of these are owned by very big groups and we keep seeing more and more consolidation."
McColl: Shares in McColl's Retail Group, which operates more than a thousand convenience stores across the UK, have almost doubled since the end of 2015. Sales for the 13-week period to Nov 26 rose 29 per cent from a year earlier, leading to annual sales of more than £1 billion for the first time, chief executive officer Jonathan Miller said in December. The company is scheduled to publish its full-year results on Feb 19.
WH Smith: A growing appetite for travel has helped drive profits at WH Smith, which sells books, magazines and newspapers at train stations and airports. The stock has jumped more than 400 per cent in the past decade, although the shares are down about 14 per cent so far in 2018 as the retailer's UK high street stores continue to suffer from declining sales.
Whitbread: Sales at Whitbread's Costa UK grew 7.2 per cent in the 13-week period ended Nov 30, which the owner of the coffeehouse chain said was helped by strategically opening new stores in locations that get a high footfall, amid a "growing demand for quality and convenience".