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Worried by wobbly economy, UK firms eye soccer glory

Worried by wobbly economy, UK firms eye soccer glory
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First Published: Mon, Apr 12 2010. 03 57 PM IST
Updated: Mon, Apr 12 2010. 03 57 PM IST
London: UK Plc will join England fans praying for World Cup glory, with retailers and broadcasters the top beneficiaries of an additional £500 million ($765 million) windfall that victory in the tournament would bring.
A good England showing in the World Cup, which begins on 11 June, is particularly important for the UK as the country is recovering from a deep recession and would have just elected a new government, invariably bringing with it uncertainty.
Fears that the 6 May UK election will not deliver a clear majority have driven strategists to cut their forecasts for sterling and the new government will have to tackle a burgeoning deficit and slow growth.
So companies can use any help they get from a positive World Cup result: the British Retail Consortium estimates that the 2006 World Cup generated £1.25 billion in retail sales and anticipates similar for 2010, with more if England progress further.
And a recent survey by PricewaterhouseCoopers showed nearly 15% of consumers intended to buy more if England won the World Cup in South Africa, treating themselves to new purchases or celebrating in pubs and restaurants.
UK bookmakers tip England as third favourites behind Brazil and Spain to win the tournament, and supermarkets such as Wal-Mart’s Asda, Tesco, sports retailers like JJB Sports and broadcasters including ITV are betting on the team enduring to the final stages.
Britain’s largest supermarket chain Tesco, which became the official supplier to the England team last week, is among the firms that has the most to gain from what would be the first English World Cup win since 1966.
But a familiar penalty shoot-out exit at the quarter-final stage and a repeat of last year’s wash-out summer could scupper the retailer’s best-laid plans.
Greg Hodge, research director at Planet Retail, said the difference between England getting to the quarter-final and the final would be worth around £500 million ($761.7 million) for the economy as a whole.
“If Tesco are planning a large promotion for the quarter-final stage and England go out, and it pours down for a whole week then the chances are their meat promotions aren’t going to go very well and they will be forced to discount,” Hodge said.
Wal-Mart, owner of British supermarket chain Asda and the world’s largest retailer, is one of the companies whose fortunes are most closely tied to the performance of the team.
As official sponsor, it stands to see huge pick-up in sales at its stores, particularly if the team progresses to the final stages of the tournament.
“Wal-Mart, as the exclusive partner for various merchandise could be the biggest winner,” said Planet Retail’s Hodge.
Wal-Mart lags its sector peers with a price-to-earnings ratio of 14.91 times, compared to the sector median of 23.1.
Investors in sports retailers like JJB Sports and Sports Direct will also be anxiously watching results as teams’ longevity in the tournament will be crucial for sales of soccer-related merchandise.
Jean Roche, analyst at Panmure Gordon, said the longer England remain in the competition, the more customers are likely to spend on soccer-related products.
“Football-related spend is a significant part of JJB’s revenues,” she said.
The success of the team will also affect electrical retailers, Hodge at Planet Retail said, providing a catalyst for a large scale purchase of televisions.
“We will see a lot of people upgrading. For this year’s Superbowl, 4 million people bought a TV set and I think there will be a benefit for electrical retailers,” he said, picking DSG International and Kesa Electricals as top gainers.
Broadcast Boost
Media firms are also among the best placed to benefit as many should be able to cash in on a surge in advertising targeting the hard-to-reach demographic of young males.
“If you look at mass media, skewed towards men, particularly media with specific right or areas of interest around the World Cup, then it’s going to have a very significant impact,” said Paul Richards, media analyst at Numis.
He cited TV companies which are showing the games as particularly well-placed to cash in, making for flattering comparisons with last year, when revenues were at rock-bottom.
“If you look at ITV, it is benefiting from all those factors. It is showing World Cup games, last year was very weak for them in terms of advertising and as the biggest single display advertising point in the UK, it’s a beneficiary of recovering ad revenues,” Richards said.
Richards also cited Talksport, owned by UTV as likely to benefit while male-oriented newspaper titles like The Sun owned by News International would benefit from increased advertising by sponsors and increased circulation.
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First Published: Mon, Apr 12 2010. 03 57 PM IST