Investors are getting more concerned about the Brexit spending slowdown

LONDON — Shares in the consumer goods group behind kettle and toaster brand Russell Hobbs and Dreamtime mattresses fell almost 50% on Monday after it warned that Brits are slowing their spending.

Ultimate Products Global Sourcing said in a trading update that conditions are getting “tougher” due to rising inflation.

“Consumers’ discretionary spend is under pressure and confidence is therefore lower than it has been for some time, which is inevitably being reflected in purchasing behaviour,” the company said in a statement. “For retailers, this has also coincided with cost price increases in the wake of last year’s sterling devaluation.”

The pound collapsed against both the dollar and the euro in the wake of last year’s vote to leave the European Union. This has made importing products from overseas more expensive for retailers, which in turn has pushed up prices for consumers.

While Ultimate Products’ market outlook was gloomy, the company still told investors to expect profits for the year just ended “above market expectations” thanks to a near 40% jump in revenues in the year to July.

You’d think investors would be cheered by the profit upgrade — in fact, shares plummeted almost 50% on Monday:

This is not an isolated incident but the latest sign of a wider consumer slowdown in the UK, which could be disastrous for retailers and the wider economy, spooking investors.

Restaurant group Fulham Shore last week warned of a “sector-wide slowdown”, while pub group Greene King also reported a sales slowdown. Deutsche Bank has also predicted a worsening of the consumer spending slowdown.

As these warnings become more frequent, investors are getting increasingly concerned about a sector-wide problem that will cause the entire retail industry to suffer, regardless of how competent management are.

That partly explains why Ultimate Products’ share price reaction has been so stark. It doesn’t help that the AIM-listed stock is relatively thinly traded, exaggerating the impact of a wave of sell orders.

Ultimate Products only listed in March, when shares were sold at 128p a pop in the IPO. Shares were comfortably above that level on Friday, closing at 210p. Today, investors who bought in at the IPO are sitting on a paper loss, with stock changing hands at around 109p on Monday lunchtime.

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