- Next
- 03 May 2024 17:21:23
Source: Sharecast
"It is well understood that unseasonably warm weather through September and October so far is unhelpful for clothing retailers as they launch Autumn/ Winter product,” the bank said.
"Recall that the AW selling period is relatively short, therefore often bringing pressure to start discounting early if there is a weak start to the season (which could be exacerbated this year amid still elevated inventory levels for some, and particularly the online players)."
JPM pointed to the last time the weather was this unfavourable, which was the fourth quarter of 2018.
"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," it said.
"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 1 Nov and 7 Nov, respectively."
More broadly, JPM said it remains concerned that the benefits of-pent up demand in the sector could start to wane, and that clothing price deflation could also weigh on top-line forecasts into 2024.
‘Catalyst Watch’ is a short-term conviction indicator that JPM analysts can apply to a stock in their coverage into a specific event to articulate short-term positivity or caution based on near-term fundamentals.
At 1030 BST, Next shares were down 3.7% at 6,950p and ABF shares were 1% lower at 1,964.50p.
