Clothing retailers look set to face a squeeze heading into the new year due to falling prices, brokers have suggested.
Anticipating a roughly 6% fall in clothing prices during 2024, JP Morgan analysts pointed out that retailers with tighter margins could face pressure.
“We think the potential for deflation in clothing prices in 2024 will be a key consideration for the sector in the coming months,” analysts noted.
H&M, Marks and Spencer Group PLC (LSE:MKS), Primark owner Associated British Foods PLC (LSE:ABF) and Asos PLC could well face the pinch, according to JP Morgan, given their “equity stories hinge on margin recovery”.
Operating expenditure is unlikely to fall at the same rate as price inflation, the bank said, particularly due to increasing costs of wages.
A lack of volume and demand growth could then add to the sector’s woes, having left analysts feeling that consensus sales estimates “look ambitious”.