Investors behind the UK fashion and clothing scene would rightly feel that they have had a rough time in recent years.
Struggling online retailer Asos was recently demoted from its position in the FTSE 250 for poor performance.
Despite being valued at £7 billion just over two years ago, shares of the online fashion retailer fell 3 percent to 333 pence on Thursday.
More generally, companies in the British fashion world underperformed significantly.
But while previously high-flying stocks like Asos and Boohoo are still struggling, some of their High Street clothing and fashion rivals are recovering, including Marks and Spencer stockswhich are up 50 percent this year.
Fall from grace: Former stock darling Asos was booted off the FTSE 250 last week for underperforming
A basket of 10 British fashion-related stocks has lost 21 percent in five years and is down 6 percent in three years, according to data from investment platform eToro.
The basket includes names such as Burberry, Aso, Boohoo, M&S and Next and has fallen in value by 21% over the past five years, underperforming the FTSE 350 by 18%.
The biggest declines have affected online fashion retailers that had boomed. In five years, Asos shares are down 95 percent, Boohoo shares down 81 percent.
Asos and Boohoo’s younger customer bases have been hit hard by the cost-of-living crisis and both have suffered a steep drop from a pandemic boom as shoppers returned to the stores. Meanwhile, Boohoo is under fire for quality and working method.
An ONS survey found that 68 percent of Britons say they are spending less on non-essentials in response to the cost-of-living crisis, with 49 percent becoming more price-conscious and shopping around.
But while the UK fashion sector may have underperformed over the past five years, there may still be an optimistic case for the industry.
Even over five years, there have been some winners, with JD Sports (up 100 percent) and Frasers (up 68 percent) delivering healthy returns over this period.
Meanwhile, the picture for fashion retailers looks set to improve in 2023. eToro’s basket of shares is up 10 percent since the start of the year, while the FTSE 350 has remained unchanged in value.
And this year it’s a member of the High Street old guard leading the pack. According to EToro’s figures, shares of Marks and Spencer were up 46 percent on the date the data was collected, but they’ve continued to rise since then, and as of June 16, they were up 50 percent this year.
|Company||five-year performance||three-year performance||One year performance||Performance so far|
|Source: eToro data taken on June 2, 2023|
Commenting on this upward trend, eToro global markets strategist Ben Laidler says: “While it hasn’t been a pretty picture for the UK fashion sector over the last five years, we are seeing early signs of a share price recovery in 2023, with sentiment starting to improve as UK inflation and interest rates peak.
“We must also recognize the very different fortunes of some of those in our basket.
“JD Sports and Frasers have delivered staggering returns for their shareholders, while others such as ASOS, Farfetch and Boohoo have seen their share prices plummet, due to a combination of the online retail hangover, weak profitability and cost-of-living headwinds.”
Finsbury Growth & Income, an investment company managed by Nick Train, owns Burberry – which, as of May 31, 2023, represents 8.7 percent of the investment portfolio.
In the company’s semi-annual report, which covered the six months to March 31, 2023, Train identified Burberry as a portfolio company that achieved an all-time record price during that period, with its share price increasing nearly tenfold since 2003.
Train is known for being upbeat about Burberry, noting: “The well-received first show of Burberry’s new creative director, Daniel Lee, in February 2023, reminded investors that this is actually an iconic, global luxury brand, well positioned to capitalize on wealth is being created, especially in Asia and America.’
Despite hitting an all-time high recently, Train wondered ‘why wouldn’t the stock price continue to do well?
“We believe that investors in the UK have sometimes overlooked the merits of the UK’s only substantial luxury brand, with its important position in outerwear – its iconic trench coat.”
AJ Bell investment director Russ Mold also agreed that ‘2023 was a different story, at least so far.
“JD Sports is doing well thanks to the athleisure trend and its strong multi-channel offering. Marks & Spencer is up nearly 50 percent in hopes of a sustainable turnaround.”
The return of the High Street
The return of the High Street has also dealt a blow to online retailers, but it also seems that some are eager to be there too.
Recently, retailer M&Co announced it would be returning to the High Street rather than just going online as it revives after the collapse, and plans to open 50 new stores across the UK over the next two years .
As Russ Mold suggests, the market was full of praise for Marks & Spencer. This is in response to the group’s well-executed change of strategy, which has dramatically improved its clothing and nutrition propositions.
Zara owner Inditex saw sales of its spring and summer collection increase by 16 percent in May. The group, the world’s largest fast fashion retailer, reported a better-than-expected 54 percent increase in net profit to just under £1 billion in the quarter to April.
Inditex said in a statement: “We expect higher sales productivity in our stores going forward.”
In-store and online sales rose 13 per cent to around £6.5 billion in the first quarter, in line with the 13.5 per cent increase in the first six weeks of the financial year.
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