This report is an updated version of the report published on 07 June 2023 at 08:03 AM GMT +1.

Section 1.0. UK Consumer Staples Sector Landscape, Trends & SWOT Analysis

Section 1.1. UK Consumer Staples Sector Landscape

The UK Consumer Staples sector includes players from various industries, such as entertainment, fashion, food, general merchandise, health & beauty, home, sports & leisure, and technology. Moreover, manufacturers and businesses are focusing on bringing process efficiencies and avoiding working capital leakages to weather the market uncertainties and deliver the incremental shareholders’ value.  As retailers are looking beyond the challenges faced in the past two years, it is imperative to capitalize on emerging consumer behaviour and advancing shopping experience through technology, innovation, and new business models. Kalkine’s Sector Report covers the Investment Summary, Sector Landscape, Trends & SWOT Analysis, Risks, Recent Business Updates along with the Valuation, Target Price, and Recommendation on the stock.

Section 1.2. Trends in the Consumer Staples Sector

Section 1.3. SWOT Analysis

Section 2.0. Sector Risks & Opportunities

Section 2.1. Risk Exposures to Consumer Staples Sector

Section 2.2. Consumer Staples Sector Outlook

The UK consumer confidence has witnessed an improvement in 2023 when compared to lows seen in the last year or so, but it’s still fragile. The most important metric to monitor the consumer sector is inflation and it went down in April 2023, yet came out to be ahead of Bank of England’s expectations. It has been observed that consumers have started saving on eating out and rather increased spending on home comforts, accessories, and furniture, with people looking for entertainment at home instead. However, consumers may get more affected by further price hikes than they were to previous price hikes in case the ongoing fear of recession elevates, and the unemployment rate rises. Overall, the demand for staples is expected to be assured irrespective of the economic environment.

After gaining insights into the Consumer Staples sector, we should look at the business model of two relevant players listed on the London Stock Exchange.

Section 3.0. Tesco PLC (LSE: TSCO) (‘Buy’ at GBX 263.10, closing price as of 06 June 2023)

3.1 Company Details

3.2. Key Metrics in Pictures

3.3 Valuation and Technical Guidance

Section 4.0: Imperial Brands PLC (LSE: IMB) (‘Buy’ at GBX 1,740.00, closing price as on 06 June 2023)

4.1 Company Details

4.2. Key Metrics in Pictures

4.3 Valuation and Technical Guidance

Please note markets are trading in a highly volatile zone currently due to certain macro-economic and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

Note 1: Past performance is not a reliable indicator of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance level is 06 June 2023. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Note 4: Target Price refers to a price level which the stock is expected to reach as per the relative valuation method and/ or technical analysis taking into consideration both short-term and long-term scenarios.

Note 5: ‘Kalkine reports are prepared based on the stock prices captured either from the London Stock Exchange (LSE) and or REFINITIV. Typically, both sources (LSE and or REFINITIV) may reflect stock prices with a delay which could be a lag of 15-20 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.’

Note 6: Dividend Yield may vary as per the stock price movement.

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock.

Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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