Today’s retail reports appear to have a common denominator of higher prices eroding margins. We’ve seen this in the share price reaction of ASOS (LON:ASOS) which has slid sharply despite the company reporting that international sales are booming, while the company also upped its forecasts.
Revenues rose 37% with sales from mobile devices taking up a good proportion of that revenue growth. The fall in the pound has boosted its international sales, however its UK margins have come under significant pressure due to heavy discounting in order to maintain market share.
While the company remains optimistic about the future and remains well ahead of the curve in terms of its business model and retail offering, the shares have slipped back sharply from last week’s record peaks of 6,130p, and look on course for their third successive daily decline.
For a retail stock, which at the end of last week had seen gains of over 80% over the last 12 months, and despite the positive outlook, investors have decided that in the current environment a lot of the good news may well be already baked in.
In the food retail sector it’s also been a bit of a mixed bag with the release of the latest Kantar grocery market share figures.
Once again it’s clear that rising prices are proving to be a challenge to the big four UK supermarkets as UK consumers continue to shop around. This retail churn rate has seen sales at Sainsbury decline 0.7%, Asda, down 1.8%, and Tesco (LON:TSCO) decline 0.4%.
The winners were the usual suspects of Aldi and Lidl who saw their market shares rise to new highs in the last 12 weeks, but they weren’t alone, with Co-op seeing sales growth of 0.8%, and Waitrose a rise of 0.3%, furthermore Iceland’s move into non frozen food retail has seen its sales growth expand sharply, up 9.8% year on year.
Topps Tiles has also borne the brunt after a slowdown in the home improvement market. It would appear that last year’s boost from a last minute rush by buyers to beat the stamp duty threshold hike on second properties a year ago has seen activity in the DIY sector ebb away as house purchase activity slowed in the second part of the year.
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