Next PLC (LSE:NXT) shares fell 3.7% as JPMorgan warned that the warm weather may not be helping clothing retailers as they launch their autumn/winter ranges.
The bank pointed out that the autumn/winter selling period is relatively short and therefore often brings pressure to start discounting early if there is a weak start to the season.
“We expect all of our clothing coverage to be impacted by the warm temperatures, but given the relative share price performance, we place Next and ABF (Primark) on negative catalyst watch ahead of their updates on November 1 and November 7 respectively,” the broker said.
JPM thinks it could turn into a similar situation to 2018, a season which retail tycoon Mike Ashley called as “unbelievably bad”.
"In a similar situation to that which we think could develop this year, the sector underperformance in late 2018 was exacerbated by concerns that weather-driven weakness could have been masking an underlying deterioration in consumer confidence," the bank noted.
“More broadly, we remain concerned that the benefits of pent up demand in the sector could start to wane, and that clothing price deflation could also weigh on topline forecasts into 2024,” it added.
Associated British Foods PLC, the owner of Primark, fell 1.1%, while other retailers under pressure include JD Sports Fashion PLC (LSE:JD.), down 2.2%, and Marks & Spencer Group PLC, down 2.1%.