The rising earnings potential of the UK’s retail sector was once again laid bare in Thursday morning trading. Latest numbers from the Office of National Statistics (ONS) showed retail sales advance 0.2% in August from the previous month, and 3.7% on an annualised basis.
This marks a welcome uptick after sales stagnated in the summer, and follows encouraging data that threatens to keep driving volumes steadily higher.
Just yesterday the ONS advised that the average British paypacket rose 2.9% between May and July, the quickest rate of growth for more than six years. On top of this, the unemployment rate slipped to 5.5% in July as the number of people in work rose by 42,000, to 31.1 million.
Following this week’s positive releases, Howard Archer of IHS Global Insight commented that “July’s marked strengthening in earnings growth, coupled with consumer price inflation dipping to 0% in August, is very good news for consumers’ purchasing power.“
The prescription for terrific revenue growth
This data is great news for businesses operating all across Britain, obviously. And for GlaxoSmithKline (LSE: GSK), heavier pockets bode extremely well for its Consumer Healthcare division — the arm produces a range of goods from Horlicks drinks to Sensodyne toothpaste. While its medicines may prove indispensable regardless of the economic climate, its consumer products often carry a premium to many of their rivals, and should therefore benefit from rising affluence levels.
At the other end of the spectrum, Dixons Carphone (LSE: DC) should also reap the rewards of improving spending power on white goods demand. The company saw like-for-like revenues in Britain advance 10% in May-July, and I expect overall sales to keep rising thanks to its rampant progress in the mobile phones market.
Trainer emporium JD Sports (LSE: JD) also cheered the market with its most recent financials, advising yesterday that total revenues jumped 21% between February and July, meaning that half-year profit rose by a record 82% to £46.6m. The business is already a magnet for sports freaks and fashionistas who turn their noses up at the cheaper wares over at Sports Direct, and fuller wallets should allow these shoppers to keep indulging their habits.
Grab a tasty slice of the action
Healthier consumer strength also bodes well for the more defensive operations of Domino’s Pizza (LSE: DOM), too, a business whose improving online presence is already helping to blast revenues higher. Everyone loves a cheeky takeaway, after all, making the firm a solid selection for those seeking dependable revenues growth. And a 10% sales underlying sales rise across its UK operations in January-June underlines the improving industry outlook.
And of course the effect of rising wages and improving levels on consumer confidence bodes extremely well for big-ticket purchases, making the likes of car dealership Lookers (LSE: LOOK) a great retail selection. Indeed, data from British Car Auctions (BCA) released this month showed sales of new and used autos hit 9.7 million in 2014, one of the highest figures on record. With conditions having improved further since then, I expect the next edition to report yet another surge in car sales.
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Royston Wild has no position in any shares mentioned. The Motley Fool UK has recommended Domino's Pizza and GlaxoSmithKline. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.