All of the clothing retailers in the FTSE 350 managed to end 2019 comfortably in the green, with three of their share prices up by at least 46 per cent year on year. But the sector-wide picture did not look friendly at all: the British Retail Consortium (BRC) and KPMG labelled 2019 as the "worst year on record" and the Office for National Statistics (ONS) found that apparel was the retail sector that contracted the most in December. The challenges that have long loomed over retail – declining footfall, sustainability pressures and the rise of e-commerce – are now making a serious dent in sales.
The barrier to entry has never been lower for clothing retailers. An ‘insta-brand’, a seller that operates solely on Instagram, could feasibly have little to no money caught up in a physical infrastructure and still get fat off the in-app shopping feature. But social media offers as much of an opportunity for traditional retailers as it does a threat. Take Burberry’s (BRBY) recent partnership with tech giant Tencent, creating a “social retail” strategy that will merge social media and a high-tech store experience.
But the truth is that Burberry is well ahead of the curve on this front. Most prime retail space is unimaginative as well as expensive – especially as business rates (which push up rent for high-street tenants) hurt traditional retailers.
This is evidently a source of frustration for Frasers Group (FRAS), the new name of Sports Direct. In January its chief executive, famed tycoon Mike Ashley, wrote to Downing Street to request the urgent reform of transitional relief, which limits how much a tax charge can change due to revaluation. Although it remains a concern, the group’s shares still climbed 83.4 per cent in the past year – not least on the news that its recently acquired House of Fraser brand has shown “green shoots” of recovery.
Its rival JD Sports (JD) was the best performer in the FTSE 100 in 2019, although it only joined the index last year. With the shares up an astonishing 92.50 per cent, the athleisure retailer’s aggressive expansion has clearly paid off. Next’s (NXT) results also remained resilient, with its share price up 46.70 per cent year on year. All of these companies have managed to continue generating sales despite the difficult retail environment.
But sustainability pressures are ramping up in the UK, especially as teenage activist Greta Thunberg reinvigorates global environmentalism. Both JD Sports and Frasers Group were classed as "less engaged" in a report on clothing consumption and sustainability from a House of Commons committee last year. It seems inevitable that the industry must take action to save itself from a severe backlash, as climate change advances and consumers demand more from the companies they buy from.
| Name | Price (p) | Market cap (£m) | 12-month change (%) | Fwd PE | Yield (%) | Last IC view |
| Burberry Group | 2,150 | 8,711 | 15.4 | 23 | 2 | Buy, 2,120p, 2 Jan 2020 |
| Frasers Group | 518 | 2,612 | 83.4 | 18 | – | Hold, 458p, 18 Dec 2019 |
| JD Sports Fashion | 855 | 8,321 | 92.5 | 24 | 0.2 | Buy, 716p, 11 Dec 2019 |
| Next | 7,056 | 9,015 | 46.7 | 15 | 2.4 |
