Deutsche Bank Downgrades Wickes Stock to Sell Amid UK Consumer Caution

Wickes Group (LON:WIX) shares are facing renewed pressure, down around 9% so far on Tuesday following a downgrade from Deutsche Bank.

The firm lowered its rating for the stock from “Hold” to “Sell,” reflecting a broader cautious outlook on the UK consumer sector, impacting multiple companies within the retail and home improvement spaces.

Deutsche Bank also cut its target for Wickes to 195p, down from the previous 205p.

The bank also downgraded shares of Associated British Foods (ABF) to “Sell” and Kingfisher to “Hold” from “Buy”, signaling concerns over potential challenges in the UK consumer market.

These downgrades are underpinned by expectations of diminishing profit margins. “We are taking a more cautious view on the UK consumer,” Deutsche Bank stated.

The analysts noted that the end of 2024 and early 2025 “are likely to have been the sweet spot, with real wage growth set to slow and fear of unemployment set to build from here.”

“Our Household Cash Flow model shows discretionary spending lagging spending power and, unless consumers reduce savings, there will be a 4ppt slowdown in discretionary spend to +3% in 2H from +7% in 1H,” the bank added.

While they noted that retail sales have been resilient into Q2, helped by warm weather, they added that “there is some variance by category” and consumer confidence metrics are said to remain subdued, while its “Fear Index” indicates things could get worse.

For ABF, Deutsche Bank cited that the margin recovery for Primark had likely peaked, and profitability at British Sugar, another ABF subsidiary, was expected to decline. Shares of ABF are down 4.5% at the time of writing on Tuesday.