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FTSE 350: Mixed fortunes for clothing chains

Apparel retailers must be guided by three key principles in 2019: digital first, product quality and appropriate prices
FTSE 350: Mixed fortunes for clothing chains

For those investors lamenting the state of UK retail, this sub-sector might offer some hope. As Christmas trading updates flood the market, it seems not all apparel retailers did as badly as the market had feared. This should give rise to pockets of optimism for the year ahead.

That said, let’s get one thing clear: the data is not on clothing retailers’ side. Overall, as per the BRC-KPMG Retail Sales Monitor (RSM) for December, three-month non-food sales fell by 0.4 per cent in total and 1.2 per cent on a same-store basis. In-store non-food sales fell by 2.8 per cent, with like-for-like sales down by 3.9 per cent. This was followed by several UK retailers referencing material uncertainty in their early January trading statements.

Such concern might have prompted Next’s (NXT) management to revise down full-year profit expectations by 0.6 per cent, but the overall picture is far better than feared. Higher sales of lower-margin, seasonal products and increased costs associated with online growth largely explain the downgrade, but full-price sales over Christmas rose 1.5 per cent, with good growth also reported in the three-week lead-up to the big day. Meanwhile, year-to-date online sales have risen 15 per cent, comfortably offsetting a corresponding 7 per cent squeeze across physical stores – a performance analysts at Liberum called “excellent”.

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