Market Prognosis

A concise summary of the major macro events of the past 24 hours, and selected UK company-specific news.

November 1, 2023

How to do fashion retail

Macro & Overnight

Yesterday, the EuroZone reported GDP and inflation rates lower than expected. When does a disinflationary slowdown (soft landing) become a deflationary recession (hard landing)?

China’s manufacturing PMI data overnight was weaker than expected.

Nationwide UK house price data shows house prices declined y-o-y by 3.3% but rose slightly last month.

Renewable energy watch BP wrote off over $500m from its US onshore wind assets yesterday; green aviation fuel supplier Velocycs fell 70% as its funding plans stalled; today, Ørsted announced that it would cease operations on two US offshore wind projects.

UK Company News

ASOS FY23 results were broadly in line with the latest guidance. Stock levels fell by c.30%; profit per order increased by over 30%; it refinanced the balance sheet, improved its covenants, and changed its management team. Over the period, it cleared about £800m of stock, with more to do in FY 2024. It anticipates a sales decline of 5% to 15% in FY24 but expects a return to growth in FY 2025. ASOS is a smaller but more resilient business and remains one of the leading players in online 20-something fashion.

Next Q3 updated that its FY sales were +4.0% on last year, £23m ahead of guidance, of +2.0%.  It is increasing FY guidance for PBT by £10m to £885m.

ASOS has been a slow-motion train wreck struggling to adapt its model to the post-lockdown consumer environment. By contrast, Next has serenely sailed through these choppy waters. However, ASOS is nearing the end of its restructuring and stakebuilding by Frasers, who have also acquired a stake in Boohoo and developed a relationship with Chinese fast fashion retailer Shein, indicating scope for consolidation in the younger fast fashion segment. Timing is, of course, critical.


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