Lower inflation means sales volumes will be a priority for UK apparel retailers in the coming spring, though easier weather comparatives and a reduction in National Insurance contributions will provide a supportive trading environment.
Analysts at RBC Capital Markets expect a return to formal and workwear demand in place of last year’s trend towards essential basics.
Regarding shelf pricing, RBC reckons Next PLC (LSE:NXT) and Zara’s parent, the Spanish conglomerate Inditex, are “relatively stable” at the mid and upper end of the mass market respectively, with Associated British Foods PLC (LSE:ABF)-owned Primark the cheapest retailer surveyed by the bank.
“This along with stronger collections and digital should enable (Primark) to continue comping positively,” stated analysts.
Low-end competitors Asda's George and Boohoo Group PLC (AIM:BOO) ”have become a little more price competitive this season”, said RBC, while Chinese e-tailer Shein “has seen a sharp move up in its pricing, reversing much of the move down we saw last season”.
Shein is “most of a threat to other young fashion e-commerce retailers”, said the analysts.
Elsewhere in the midmarket, Marks and Spencer Group PLC (LSE:MKS), ASOS PLC (LSE:ASC) and Tesco PLC (LSE:TSCO) have all become relatively more expensive this season.
Meanwhile, “H&M’s pricing, which moved up last season more into the midmarket, is relatively stable this season, however it still looks high compared to its historic average discount of 15-20%”.
To make the pricing calculations, RBC took a basket of around 15 items for each of womenswear, menswear and kidswear, for each retailer, aiming to find the cheapest item at full price for each category tested (such as women's jeans, men's white shirts, girls’ coats).
The bank then added up the basket size and divided it by the number of items tested to determine the standard percentage deviation versus industry average.
Overall, the outlook is bullish for the sector, with AB Foods, Inditex and JD Sports Fashion PLC (LSE:JD.) all netting an 'outperform' stock rating in RBC’s coverage.