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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. 10 20 PM IST
Updated: Mon, Apr 12 2010. 10 20 PM IST
London: Companies in the UK will join England fans in praying for World Cup glory, with retailers and broadcasters the top beneficiaries of an additional £500 million (Rs3,375 crore) windfall that victory in the tournament is estimated to bring.
A good England showing in the World Cup 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 May 6 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 such as 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 or 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 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, 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 such as 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, four 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.
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.
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First Published: Mon, Apr 12 2010. 10 20 PM IST