The FashionUnited Top 100 Index closed Tuesdayat 1,198.98, down by 5.64 but reducing the downfall from last week. Last economic data have helped to calm investors’ fears while the Fed believes that growth will pick up later this year. In the UK, Burberry was the biggest faller among fashion retailers gathered within the FTSE- down 2.9pc - after a note by Bank of America highlighted the downside risks for luxury goods stocks if a double dip recession occurs.
In their last overview on their picks within the UK stocks market, the analysts of Nomura do point out that UK retail may in fact benefit from a global slowdown, because falling demand should see imported inflation decrease for the UK. Retailers could see buying gains as their bargaining power improves, which would in turn reduce pressures on the consumer. "In particular, we see the low-end demographic in the UK having a small relative benefit, given a greater proportion of its expenditure is on non-discretionary items such as food and fuel."
Nomura reckons retailers such as H&M, Argos and Primark may outperform on a relative basis, as the low-end consumer sees some benefit and others trade down into the brands.
Based on a no-growth scenario for the UK over this year, the average expected downgrade across the sectors would be around 10 percent in food retail, 15 percent in general retail and 25 percent in luxury goods, says Nomura. Across the general retail sector, Nomura's top picks with "buy" ratings are M&S targeting a price of 460 pence (current price: 326 pence), and Next with a target price of 2,700 pence (current: 2,181 pence).Next has, in the short term, says Nomura, self-help or growth initiatives to offset underlying weakness.
Across the Pond, analysts from Trefis have a near $20 price estimate for American Eagle’s stock, which is well above the current market price. “We will revise our estimates following earnings as we update our forecast”, they say with their sight already on the company´s quarterly figures, to be released later on Wednesday. Shares of Abercrombie and Aeropostale are down around 20% in the last 3 months compared to nearly 40% for Aeropostale.