Friday, August 19, 2022

All eyes on ASOS, Burbery as they prepare post-Brexit trading updates

The retail industry and the City are expected to be closely watching ASOS next week as the online fashion retailer releases its third quarterly trading update amid concerts the Brexit referendum has made shoppers more cautious on spending.

The company achieved a double-digit hike in half-year profits in April, thanks to bumper festive season that saw retail sales spike 25 per cent to £289.5 million. International sales were up by 24 per cent at £359.1 million.

While there are expectations it will continue its strong run, questions around consumer spending in the wake of the EU referendum could have an impact on sales when ASOS’ trading update is delivered on Tuesday.

Earlier today, market research institute GfK released a special one-off Consumer Confidence Barometer which indicated that the Core Index had dipped eight points to -9.

The barometer, which surveyed 2002 people online between June 30 and July 5 to measure the post-referendum sentiment, was also the sharpest drop since December 1994.

Some analysts are predicting ASOS would capitalise on the falling value of the pound in the wake of the referendum, as 60 per cent of its customers and sales are international. 

Peel Hunt analyst Jonathan Pritchard said the low sterling gave ASOS an opportunity to lower global prices.

“This will be done at pace, and management’s expectation is that this will generate a ‘halo’ effect to drive higher sales in the future,” he said.

The City will also observe how Burberry could fare in a post-referendum world when the luxury fashion retailer posts quarterly figures on Wednesday.

Like ASOS, Burberry is expected to signal it is benefiting from the weak pound, with most of its sales coming from overseas.

Graham Spooner, investment analyst at the Share Centre, said: “Burberry should be one of those companies that benefits from the fall in sterling as its disproportionately large overseas earnings should in theory get lifted.”

In May, Burberry’s pre-tax profits fell 10 per cent to £421 million as the luxury retailer faced a challenging trading environment.


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