NEWS
Why athleisure is holding up but demand for fast fashion is fading Frasers and JD Sports are kicking on but challenges mount for beleaguered ASOS and Boohoo
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ccording to the latest ONS data (22 July), UK retail sales volumes fell by 0.1% in June following a 0.8% decline in May 2022 as soaring inflation and the cost-of-living crisis put the squeeze on consumers. However, two sector constituents shrugging off the wider malaise are Sports Direct owner Frasers (FRAS) and JD Sports Fashion (JD.), with sales of sportswear and athleisure holding up well amid the deteriorating economic climate. Mike Ashley-controlled Frasers’ shares dashed ahead after the retail conglomerate behind House of Fraser, FLANNELS and Evans Cycles shrugged off inflationary pressures and supply chain challenges to report (21 July) a swing from losses of £39.9 million to forecast-beating adjusted pre-tax profits of £344.8 million for the year to 24 April 2022, buoyed by a strong reopening of physical stores. Frasers also upgraded pre-tax profit guidance for 2023 to between £450 million and £500 million with CEO Michael Murray insisting it is ‘clear that our elevation strategy is working’ and that his charge is building ‘incredible momentum with new store openings, digital capabilities and deeper brand partnerships across all of our divisions’. Sportswear rival JD Sports expressed confidence (22 July) headline profit before tax and exceptional items for the year to January 2023 will match last year’s record £947.2 million haul after delivering 5% like-for-like sales growth in the first five months of its new fiscal year. JD Sports’ positive performance demonstrates athleisure is still in demand and younger customers, who may live at home or rent from a landlord picking up some of the slack from rising bills, can still find the money for must-have sneakers or essential gym kit.
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| SHARES | 28 July 2022
ONLINE PLAYERS UNDER PRESSURE ONS data revealed the proportion of retail sales online fell to 25.3% in June, its lowest proportion since March 2020’s 22.8%. Like JD Sports and Sports Direct, pure-play online fashion purveyors ASOS (ASC) and Boohoo (BOO:AIM) also target youthful consumers, but their growth is slowing as cash-strapped shoppers cut spending on nonessential clothing amid rising inflation and growing recession risks. Margins are also being impacted by surging product returns. Costly and complex to handle, returns have long been a margin-eroding menace for the online-only clothing industry, which is why Boohoo quietly introduced a returns charge in early July in a bid to eradicate bad shopper behaviour. How much this will deter shoppers and hit market share is yet to be seen. As for ASOS, suppliers have complained to the Daily Mail about orders cancelled at short notice as the retailer adjusts to weaker demand, though the company reassured the newspaper these were ‘postponements’ not cancellations and they are running at normal levels for this time of the year. Worryingly, suppliers seem to fear these are in fact cancellations from ASOS and that more may follow. [JC]
