May retail got a temporary boost from weather, but European consumer confidence and cost pressures still weigh on the general retail sector

Overview

This report is J.P. Morgan's European General Retail Jun-26 chartbook, focusing on UK and European apparel retail, consumer macro indicators, online penetration, costs, freight, foreign exchange, and sector valuations. The core judgment is that retail data improved in May due to warmer weather and heatwaves, but the improvement was more reflected in online channels and short-term seasonal drivers; meanwhile, consumer confidence, French real wages, the housing market, freight, and raw material costs still indicate that pressure on demand and margins has not disappeared.

Core views

The report believes the UK apparel market improved significantly in May versus April, but heatwaves supported online sales more than stores, so May strength should not be directly interpreted as a renewed acceleration in offline retail or overall consumption. Primark's Worldpanel growth and share on a two-year basis remained negative in the 12 weeks to May 24, weakening the credibility of its UK consumer re-engagement strategy; by contrast, although Next's growth slowed, it still outperformed company guidance, Marks & Spencer continued to regain share, and online platforms such as Zalando are more likely to benefit from heatwave-driven online demand. On the macro side, real wages in the UK and Europe generally remain positive, but France has turned slightly negative; European consumer confidence remains far below pre-pandemic levels, with Germany seeing the deepest decline. On the cost side, cotton, polyester, ocean freight, air freight, and fuel are all up meaningfully versus the start of the year or before the Middle East conflict. Although a Middle East peace agreement may bring some relief, uncertainty and surcharge pressure remain in the short term.

Analysis framework

The report uses a chartbook approach, cross-validating industry trends across multiple dimensions including high-frequency retail sales data, consumer confidence and wages, housing and energy bills, online versus store channel performance, apparel retailer market share, input costs, freight, exchange rates, and sector valuations. Its analytical focus is not to build a single earnings forecast model, but to use data sources such as BRC, BDO, Worldpanel, GfK, RICS, Ofgem, and Drewry to assess short-term demand quality, channel divergence, and cost pressure.

Methodology notes

• High-frequency consumer trackingRetail sales yoy and like-for-like sales analysis

  Use monthly BRC and BDO data to observe sales momentum in UK food, non-food, apparel, home goods, and online channels.

  The report links the sales rebound in May to the weak base in April, seasonal weather, and heatwaves, and further breaks down online versus store performance to avoid misjudging weather-driven short-term improvement as a structural recovery in demand.

• Consumer macro analysisTracking real wages, consumer confidence, and the housing market

  Use wage growth, inflation, GfK consumer confidence, and the RICS housing survey to assess household purchasing power and willingness to spend on big-ticket items.

  Real wages in the UK and Europe remain positive, but consumer confidence is significantly below pre-pandemic levels; France's real wages have turned negative and housing surveys remain weak, indicating that the foundation for retail demand remains fragile.

• Cost and margin driversAnalysis of raw materials, freight, energy, and FX pressure

  Track the impact of cotton, polyester, ocean freight, air freight, fuel prices, and GBP/USD and EUR/USD movements on apparel retailers' costs and gross margins.

  The report emphasizes that even when retailers have freight hedges, many contracts still include war or fuel surcharges, and European apparel retailers are already bearing those costs.

• Relative beneficiary assessmentChannel exposure and company share comparison

  Compare the relative positioning of retailers such as Primark, Next, Zalando, and Marks & Spencer amid weather effects, online channels, and market share changes.

  Because May's incremental demand came more from online channels, the report believes Next and Zalando are more likely to benefit than Primark; Marks & Spencer's market share recovery supports the view that its food, home, and apparel businesses are regaining momentum.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Primark

  Has higher exposure to offline apparel retail and is a key relatively pressured name discussed in the report.

  Strengths

  Womenswear is performing better than menswear and childrenswear, and the UK market already has consumer re-engagement initiatives in place.

  Weaknesses

  Worldpanel data show that growth and share on a two-year basis remained negative in the 12 weeks to May 24; May's heatwave supported online sales more than stores.

  Comparison

  The report explicitly believes May strength should not be extrapolated to Primark, while Next and Zalando are more likely beneficiaries.

  Risks

  Weak consumer confidence, soft store traffic, insufficient effectiveness of the UK strategy, and rising freight and raw material costs.

• Next

  A UK retailer with online capabilities and strong execution, and one of the names the report sees as more likely to benefit.

  Strengths

  Growth has slowed but still exceeded company guidance, and its online channel is more sensitive to weather-driven demand.

  Weaknesses

  The slower growth rate shows overall industry demand is still not broadly strong.

  Comparison

  Relative to Primark, Next is better positioned to capture heatwave-driven online apparel demand.

  Risks

  Consumer confidence, cost inflation, FX volatility, and a slowdown in June sales momentum.

• Zalando

  A European online apparel retail platform that may benefit from heatwave-driven online consumption.

  Strengths

  Online channels clearly outperformed stores in May, and heatwaves also appeared in some European countries.

  Weaknesses

  The report does not provide detailed quantified data on Zalando's own sales or market share.

  Comparison

  In an environment where weather is supportive and online is stronger than stores, Zalando is more favorably positioned than offline retailers.

  Risks

  Weak European consumer confidence, still-soft apparel sales in Germany, and pressure from promotions and logistics costs.

• Marks & Spencer

  A UK retailer whose market share recovery is viewed by the report as a positive signal.

  Strengths

  Market share rose 159bps yoy and 44bps on a two-year basis, supporting the view that it is regaining momentum in FH&B.

  Weaknesses

  It still operates in an industry environment of weak overall consumer confidence and soft demand for larger home-related purchases.

  Comparison

  Compared with Primark, whose market share remains negative, Marks & Spencer's share recovery is more supportive.

  Risks

  Volatility in home and apparel demand, cost pressure, and UK macro and political uncertainty.

• UK online non-food retail

  The main beneficiary channel of weather-driven retail improvement in May.

  Strengths

  UK non-food online sales rose about 10% yoy in May, significantly better than the slight decline in stores.

  Weaknesses

  Online strength may partly reflect short-term weather and seasonality rather than a sustainable consumer recovery.

  Comparison

  Clearly outperformed offline stores and is a key dimension in differentiating which retailers benefit more.

  Risks

  A pullback in June momentum, weak consumer confidence, promotional competition, and rising logistics costs.

• FTSE 350 General Retail Index

  A representative index for valuation and risk appetite in the UK general retail sector.

  Strengths

  Improved May sales provide a short-term fundamental buffer.

  Weaknesses

  The index is down 7% since the Middle East conflict and slightly down ytd, showing that the market remains concerned about costs and demand.

  Comparison

  Covered stocks are down an average of 6% ytd, with UK traditional retailers falling more.

  Risks

  Freight, fuel, cotton prices, FX, consumer confidence, and geopolitical changes.

Key data

• UK May BRC total retail sales+3.7% yoyApril was -3.0% yoy; May was supported by an easier comparison base and seasonal weather.
• UK May BRC non-food sales+3.5% yoyApril was -3.3%; non-food online sales were about +10% yoy, while stores were about -0.4%.
• UK May apparel sales+6.5%Apparel was the best-performing non-food category and turned positive for the first time since Jan-26.
• UK May BDO like-for-like sales+3.4% yoyApril was -1.6%; Fashion was +4.6%, Homewares was +6.7%.
• BDO sales month-to-date in JuneFashion -1.1% yoy; Homewares -0.4%June month-to-date covers the two weeks through June 14, showing that momentum did not fully continue after the weather-driven strength in May.
• UK consumer confidence in June-23GfK said the apparent stability is misleading, with no positive confidence scores across any income or demographic groups.
• European consumer confidenceAbout 20 points below the pre-pandemic averageGermany saw the deepest decline, Poland the shallowest, followed by Spain.
• Real wage growthUK +1.6%; Europe +1.3%France's Q1 26 real wage growth turned slightly negative for the first time since Q3 23.
• European May apparel salesSpain +5.7%; Poland flat; Sweden +6.4%; Germany -6%Germany remains at -3% month-to-date in June, relatively weaker than other tracked markets.
• Cotton prices+18% ytd; +16% yoyUp about 20% since the start of the Middle East conflict; raw cotton typically accounts for a low- to mid-single-digit percentage of apparel retailers' COGS.
• Ocean freight rates+68% ytd; +44% yoy; 193% above 2019Up about 107% since the start of the Middle East conflict; Drewry noted that the agreement improved sentiment but execution and the impact on global shipping remain uncertain.
• FX changesGBP/USD -1.9% since the conflict; EUR/USD -2.9% since the conflictGBP/USD is -1.8% ytd and -2.4% yoy; EUR/USD is -2.3% ytd and -0.5% yoy.
• FTSE 350 General Retail Index-7% since the Middle East conflict; -0.3% ytdThe index rose 11% in 2025, but performance has weakened notably in 2026.
• Average performance of covered stocks-6% ytd; -7% since the conflictUK traditional retailers are -8% ytd and -11% since the conflict; European stocks are -6% ytd and -8% since the conflict.

Impact & implications

The implication for the general retail sector is that improved May data can ease concerns about near-term sales, but the quality of the improvement is short-term, weather-driven, and online-skewed, making it difficult to prove a full recovery in consumer demand. From an investment perspective, more attention should be paid to channel mix, online exposure, market share, and cost pass-through ability rather than simply looking at a single month of sales rebound. If consumer confidence remains weak and freight and raw material costs stay elevated, offline apparel retailers and big-ticket home-related categories will still face pressure on margins and sales sustainability.

Risks

• Consumer confidence remains weak, with UK and European confidence indicators still significantly below pre-pandemic levels.
• The rebound in May sales was heavily influenced by weather and online channels and may be difficult to sustain in June and subsequent months.
• France's real wages have turned slightly negative, which may weaken apparel and discretionary demand in parts of Europe.
• Rising ocean freight, air freight, fuel, cotton, and polyester prices may compress apparel retailers' gross margins.
• Although there are signs of a peace agreement in the Middle East, shipping execution, surcharges, and peak-season demand still create uncertainty.
• UK political events and a weak housing market may further affect consumer confidence and big-ticket spending.
• Weaker GBP/USD and EUR/USD may raise USD-denominated sourcing and import costs.

What to watch

• Whether BDO and BRC sales in June and subsequent months continue May's improvement, especially in Fashion and Homewares.
• Whether the growth gap between online and store sales narrows, indicating whether weather-driven demand is becoming broader.
• Changes in share and guidance for Primark, Next, Zalando, and Marks & Spencer.
• Trends in GfK consumer confidence, consumer confidence in major European countries, and French real wages.
• Ofgem energy bill forecasts, petrol and diesel prices, and pressure on household disposable income.
• Drewry ocean freight rates, war and fuel surcharges, and progress in implementing the Middle East peace agreement.
• The impact of cotton prices, polyester prices, GBP/USD, and EUR/USD on apparel retailers' costs.
• Whether the FTSE 350 General Retail Index and relative performance of covered stocks reflect easing cost pressure.