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Black Friday may not produce the profit bonanza retailers are hoping for

The UK's more traditional retailers are facing even fiercer competition from their online rivals this year as pandemic restrictions shift the battlefield into the digital arena

Marks and Spencer Group PLC - Black Friday may not produce the profit bonanza retailers are hoping for

The 27th of November, now known as Black Friday, has now seemingly achieved its transition from a purely US phenomenon into a worldwide shopping day, as retailers all over the globe announce a multitude of deals ahead of the even more critical Christmas trading season.

However, while many would expect the buying bonanza to push shares in the UK’s biggest retailers higher, Friday’s session has seen the opposite occur.

In lunchtime trading, shares in high street giant Marks & Spencer Group PLC (LON:MKS) were down 2.4% at 127.1p, while Next PLC (LON:NXT) slipped 1.3% to 6,492p, Frasers Group PLC (LON:FRAS) dropped 1.8% to 444.3p and Primark owner Associated British Foods PLC (LON:ABF) fell 0.9% to 2,120p.

Hargreaves analyst Susannah Streeter said that the decline may be because the UK’s bricks and mortar retailers are facing “even fiercer” competition this year from their online rivals, as lockdown restrictions force physical stores to close and shift the playing field into the digital realm.

“That’s helped send retail shares lower amid fears higher competition will mean lower profits. The fight for clicks could see many more loss leaders pushed by retailers – those big ticket items with massive reductions - which are aimed at luring people into digital stores in the hope they will fill up their baskets with other items as well”, Streeter said.

The analyst added that given the higher online competition, it is “looking likely” that the discounts will linger for longer, applying pressure to margins during a trading period that may retailers rely on to turn a profit.

However, the shift to online may have at least some beneficiaries on the UK market, notably parcel delivery firms such as Royal Mail PLC (LON:RMG), which is aiming to focus on parcels as a profitable revenue stream going forward to offset falling returns from other forms of post.

Quick facts: Marks and Spencer Group PLC

Price: 139.4251 GBX

LSE:MKS
Market: LSE
Market Cap: £2.73 billion
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