Retail groups respond well: Profits should follow inflation element

Both food and textile based retail groups have been outstanding stockmarket performers since the general upturn in share prices since last January. At the beginning of June for instance, both sectors were showing increases of around 150% from the low point of 1975. That is a little in excess of the general market rise, but it is true to say that the retail groups responded faster than a number of other sectors, and the FT indices include a sprinkling of companies from all areas of the economy, some of which do far better than others. Within the retail sector the large ‘blue chip’ groups, Marks & Spencer and British Home Stores, whose results we review below, Tesco and Sainsbury, have substantially outperformed the averages. This is only to be expected in an inflationary climate where retail shares provide one of the best hedges against the fall in purchasing power.