'From boom to gloom' - BofA sees more challenging 2024 outlook for EU apparel retailers
17/01/2024 14:13
** BofA Global Research sees a more challenging 2024 outlook
for European apparel retailers after "exceptional" last year as
slower revenue growth and higher costs will cap margin uplift
** The broker cuts five stocks in its coverage and now has
nine out of 12 on "underperform" or "neutral" rating
** Among its 2024 themes it names pricing headwind and
limited volumes growth, an "alarming signal" on consumer
appetite
** It notes that retailers with differentiating business
models, such as Inditex ITX.MC , or brand turnarounds like
Marks & Spencer MKS.L , will keep outperforming in 2024,
whereas players mainly focused on low-prices such as online
retailers or H&M HMb.ST to keep losing market share in 2024
** BofA forecasts a sector gross margin of +1 percentage
point in 2024, with no operating leverage and EBIT up by 80bps
to 11.1%
** "Buy"-rated Inditex remains one of its top picks given
that its focus on product relevance rather than price and
omni-channel delivery network should help it deliver faster
growth
** Its other "buy"-rated names are Germany's Hugo Boss
BOSSn.DE and Marks & Spencer
** BofA cuts online retailer Zalando ZALG.DE , bootmaker
Dr. Martens DOCS.L and clothing retailer Next NXT.L to
"neutral" from "buy", while H&M and French fashion group SMCP
SMCP.PA to "underperform" from "neutral"
(Reporting by Tristan Veyet)
((Tristan.chabba@thomsonreuters.com))