In a tumultuous year for the UK economy, fashion stocks took the brunt of a major downturn in consumer confidence, while City confidence in the sector’s stocks also hit rock bottom.
Only two businesses, young fashion etailer Asos and kidswear and nursery chain Mothercare, finished the year with a share price higher than 12 months ago. The former, also the biggest riser last year, continued its inexorable share price growth, reaping the rewards of shoppers’ increasing willingness to buy online.
Mail-order firm N Brown maintained its share price on last year, which was no mean feat in the current environment.
But what started out as a credit crunch late last year turned into a full-blown recession. At the end of 2008, 72% had been wiped off the total market capitalisation of the firms in Drapers’ Sharewatch, valuing them at 19.5 billion against 69.3bn at the start of the year.
The biggest faller was sportswear chain JJB Sports. Hit by the Icelandic banking crisis, a loss of insurance for suppliers and accusations of breached banking covenants, the company ended the year having to postpone loan repayments and facing an Office of Fair Trading investigation following stake building by rival retailer Sports Direct. About 95% was knocked off its share price during the year.
JJB Sports’ rivals were also hit, with Sports Direct down 58% to 35.75p, while JD Sports Fashion’s respectable sales performances throughout the year could not stop the value of its stock halving over 12 months.
Middle-market retailers such as Alexon Group and Blacks Leisure had a very tough year. Blacks Leisure this week finished at its year low, down 83% on 12 months ago. After being plagued by accounting discrepancies at its Sand City boardsports subsidiary, putting its boardsports division up for sale and ending its licensing deal with surf brand O’Neill, the firm is hoping that revamps of its Blacks and Millets stores will help a recovery in 2009.
Marks & Spencer and Moss Bros both had a rollercoaster year. The former met with controversy over chief executive Sir Stuart Rose’s appointment as chairman, which angered investors. Menswear firm Moss Bros was courted by Icelandic investor Baugur and Arcadia boss Sir Philip Green but had offers from neither. Share prices fell 58% and 63% respectively.
Debenhams was also a big faller, down 70% on last year. The short tenure of the department store chain’s managing director Angela Spindler and the company’s on-off Sale strategy in the run-up to Christmas were key events in the past 12 months.
By the end of the year, consumer confidence also dipped in the more premium end of market, with both Burberry and Mulberry showing significant falls in share price, down 61% and 55% respectively.
Exits from the Sharewatch table over the year were sports brand Umbro, which was bought by Nike in March, brand house Marchpole, which fell into administration in November, and Woolworths, which also went into administration in November.
Ups and downs:
2008’s only risers:
2008’s biggest fallers:
JJB Sports -95%
Blacks Leisure -83%
Alexon Group -79%
Jacques Vert -72%
French Connection -70%
Moss Bros -64%
The City view: analysts’ 2009 forecasts
“The big five fast-fashion chains – New Look, H&M, Zara, River Island and Topshop – will jostle for position but will collectively grow and put more pressure on the middle market. Primark will have to deal with higher import costs but will continue to do well. Next’s improved ranges and store design will insulate it to a degree from the downturn, but investors will be shocked at how much damage Marks & Spencer will suffer to its market share and pricing power. Bhs could move into a loss.”
Nick Bubb, retail analyst, Pali International
“Companies best placed will be those able to control their operations tightly, do not need repositioning, have decent balance sheets and strong differentiation. There will be beneficiaries of trading down to cheaper product as unemployment grows. We expect Next, Primark and food retailers to do best. Marks & Spencer will continue to struggle. The stock market will try to gauge the likelihood of a 2010 recovery, so shares may go up while profits go down.”
Tony Shiret, retail analyst, Credit Suisse
“Any ‘winners’ next year will only be in relative terms. The big losers will be in the middle market. We will also see the top end hit by the downturn, while bridge brands will be more promotional and discount-driven. I expect department stores will have a difficult time. Primark will keep doing better than the rest but will come under more pressure. I can’t see any reason why, like the US, we won’t see 10% and 15% year-on-year monthly sales drops in the UK.”
Andy Wade, retail analyst, Numis