Bank of America (BofA) has issued a fresh note naming its top pick among UK food retailers, following a notable pullback in the sector. The investment bank’s analysts argue that the recent decline presents a buying opportunity for investors seeking defensive exposure, though they stop short of offering personal investment advice. The call comes as the FTSE 100 has struggled to hold above 7,600 points, with the broader market weighed down by persistent inflation and uncertainty over interest rate cuts.
The unnamed retailer—understood to be one of the ‘Big Four’ supermarkets or a major discount chain—has seen its shares fall by roughly 8% over the past month, according to market data. BofA’s research team points to the company’s strong market share, robust supply chain, and ability to pass on cost increases as key factors supporting a rebound. The sector as a whole has faced headwinds from rising labour costs, higher energy bills, and cautious consumer spending, which have squeezed margins across the board.
For UK investors and pension holders, the supermarket sector has long been considered a defensive haven during economic downturns, as people continue to buy food regardless of the wider climate. However, the rise of discounters such as Aldi and Lidl has intensified competition, forcing traditional players to cut prices and invest in loyalty schemes. BofA’s analysts note that the selected retailer has managed to navigate these pressures better than its peers, maintaining both volume growth and profitability.
The broader FTSE 350 Food & Drug Retailers index has declined by around 5% year-to-date, underperforming the wider market. Analysts at other City firms have also highlighted the sector’s dividend yields, which average around 4%, as an attractive income stream for long-term investors. Nevertheless, they caution that any further deterioration in consumer confidence or a resurgence in input cost inflation could weigh on share prices in the near term.
Source: Bank of America research note, market data from London Stock Exchange.