A ray of sunshine for ‘summertime’ shares
Consumer spending remains resilient, so which companies might shine over the summer months?
14th August 2023 10:47
by Tzoulianna Leventi from abrdn
The resilience of consumer spending – despite inflation, energy costs and higher interest rates – could see a range of ‘summertime’ shares shine over the current holidays and beyond.
From the companies providing the sausages for your BBQ to the airline flying you to your destination – there are numerous businesses that may see some momentum over the summer months.
A brighter outlook
After a winter of energy-price hikes, higher interest rates and food inflation, the consumer mood seems to have improved with the weather. Many people are travelling to festivals or abroad for the first time since lockdown. Household savings in the UK and EU appear to be holding up from the years when travel and leisure were curtailed. There’s an increased appetite for spending on clothes, socialising and other activities.
Consumer spending in the UK is up to almost pre-pandemic levels. In the EU, spending gradually climbed over 2022 to hit pre-Covid-19 highs. European gross domestic product (GDP) expanded 1% in the first quarter of 2023. In the UK, GDP rose by 0.2% in April, driven by leisure spending.
As a result, all kinds of summertime stocks, from hotels to hire-car companies, drinks manufacturers and airlines, may experience a boost. However, there are also several companies in the small- and mid-cap sector that we believe have the potential to do well – in the coming months and over the longer term.
Taking flight
Airlines and holiday operators are beginning to recover from the dual damage wrought by the pandemic and higher fuel prices. Jet2 Ordinary Shares (LSE:JET2), the UK’s largest tour operator and third-largest airline, still has some way to go to recover revenues and share price. Nonetheless, the company is aiming to become a sustainable leader in air travel and holidays, and is investing in relationships with hotels that align with its standards. It continues to focus on destinations in the Mediterranean and major European cities.
Historic Italian company Piaggio & C. SpA (MTA:PIA) manufactures one of the iconic vehicles of the summer – the Vespa motor scooter. The company has seen better-than-expected European demand in early 2023, thanks to China’s reopening, good summer weather (especially in southern Europe), and the shift of consumer demand towards recognised brands and luxury goods. A small exposure to electric and hybrid versions of its scooters, and a new production factory in Indonesia, have also contributed to improved performance. Trading on its respected European heritage, Piaggio aims to increase its presence in Asia where the Vespa is perceived as a luxury brand.
At your leisure
With parents, children and students off, there’s likely to be a growth in leisure spending. Among the hospitality and leisure stocks that could do well is Hollywood Bowl Group (LSE:BOWL). This bowling business operates in the UK and Canada and has already reported that 2022 revenues are up – beating the pandemic years and pre-pandemic 2019.
The German event ticketing company CTS Eventim AG & Co. KGaA (XETRA:EVD), is one of Europe’s largest ticket providers for live entertainment. This includes pop concerts, classical music events, sports fixtures, and music festivals. Its revenues have climbed as people put lockdowns firmly behind them and begin socialising en masse.
Companies that provide all the ingredients for summer entertaining may also be back on the menu. We like food manufacturer Cranswick (LSE:CWK), which supplies global food producers with everything from gourmet sausages to premium cooked poultry. The company aims to make the summer BBQ as sustainable and ethical as possible with a traceable ‘farm-to-fork’ journey. High investment levels have strengthened Cranswick’s competitive position.
Final thoughts...
There’s no doubt that high rates of inflation, plus the rise in interest rates that fuelled much steeper mortgage and loan repayments, have dealt major blows to the consumer. Nevertheless, spending levels are still holding up as people appear determined to make hay while the sun shines.
The value of investments and the income from them can go down as well as up in investors may get back less than the amount invested. Past performance is not a guide for future results.
Tzoulianna Leventi is an investment and ESG analyst at abrdn.
ii is an abrdn business.
abrdn is a global investment company that helps customers plan, save and invest for their future.
These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.
Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.