Shares in non-food retailers like Primark owner Associated British Foods PLC (LSE:ABF) and B&Q owner Kingfisher PLC (LSE:KGF) fell as analysts at Deutsche Bank took a more bearish view, while industry data showed that prices continued to fall this month.
AB Foods and Kingfisher were both downgraded by Deutsche Bank, which said it was "taking a more cautious view on the UK consumer", as real wage growth is set to slow and fear of unemployment is expected to build.
While retail industry sales data has been resilient, helped by warm weather, consumer confidence metrics are subdued and the bank's analysts said their 'fear index' suggests "things may be getting worse".
Anlaysts said ABF, Kingfisher, Wickes Group PLC (LSE:WIX) and Next PLC (LSE:NXT) were its least preferred UK retail stocks as "we see a combination of more pressure on the consumer, cyclical downside in the category which provides increased earnings risks and valuations which do not adequately reflect this".
Most preferred are M&S, Tesco, B&M European Value and Dunelm.
Shop price data
Separately, overall shop price inflation stepped up to 0.9% in August, the highest level since March last year, according to the shop price monitor produced by the British Retail Consortium and NIQ.
Food inflation increased to 4.2% in August from 4.0% in July, led by higher fresh food prices.
However, non-food prices were down 0.8% year on year, easing slightly from -1.0% in July and the three-month average of -1.0%,
"Staples such as butter and eggs saw significant increases due to high demand, tightening supply, and increased labour costs," said BRC chief Helen Dickinson.
"Chocolate also got more expensive as global prices of cocoa remain high owing to poor harvests."
NIQ's Mike Watkins said higher prices reflected "global supply costs, seasonal food inflation driven by weather conditions, the conclusion of promotional activity linked to recent sporting events, and a rise in underlying operational costs".