IN THE BACK
All-consuming
An obsessive focus on fundamentals means JPMorgan ’ s Katen Patel is confident these consumer-facing stocks will survive the hit to discretionary spending
The consumer industry is in many ways the backbone of the UK economy , but it is not immune to economic pressures : rising inflation , supply-chain issues and dwindling sentiment . While the near-term prospects for markets are uncertain , we remain focused on company fundamentals that will drive performance over the long term . When we assess the investment opportunities in the consumer sector , we look for profitable and cash-generative companies with good management teams that can withstand prevailing headwinds to produce resilient returns over the long term , and we like the following three companies for this reason .
Analysts expect Watches of Switzerland ’ s revenue to reach more than double the pre-pandemic peak in the coming 12 months , and earnings to increase almost fourfold . This optimism is bolstered by the brand ’ s inflation-proofing potential : luxury watches are durable assets with higher demand than supply , and retailers can pass on cost pressures to largely priceinsensitive customers . The luxury retailer ’ s long-term prospects also look attractive : in the US , sales of luxury watches are 40 % lower per capita than in the UK , providing an opportunity for growth . It also recently entered the $ 14bn European luxury watch market , helped by strong relationships with suppliers .
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