2022 to be tough for retailers: Are these 2 AIM stocks still a buy?

Highlights

  • Retailers are expected to be impacted by multiple headwinds, including soaring energy bills.
  • Sales growth of the retail sector in December 2021 was at 2.1 per cent, compared to 1.8 per cent in the same month in 2020

UK based retail companies are expected to be impacted by multiple headwinds including soaring energy bills, an increase in national insurance later this year, a rising inflationary environment, and consumer spending seeing a hit due to rising cost of living, according to a joint report by trade body the British Retail Consortium (BRC) and KPMG.

These headwinds are in addition to the ongoing challenges the industry is facing regarding increasing expenses related to logistics and transportation and ongoing staff shortages.

The reports warning retailers being impacted this year come despite the sector witnessing a strong growth in trading during the festive period. According to the BRC-KPMG data, sales rose by 2.1 per cent in December 2021 compared to a growth rate of about 1.8 per cent in December 2020.

Total sales in 2021 increased by 9.9 per cent from the previous year. Food sales growth in 2021 rose by 3.1 per cent from the year before, whereas non-food growth saw an increase of about 15.6 per cent

Let us explore the investment possibilities of 2 nonfood retail stocks amid this development:

  1. Asos PLC (LON: ASC)

Asos is an online fashion and cosmetics retail group. It belongs to the FTSE AIM UK 50 index.

The company’s FY 2021 group revenues were at £3,910.5 million, up by 20 per cent from £3,263.5 million in FY 2020.

And its Gross profit for the year rose to £1,776.4 million, higher by 15 per cent to £1,547.4 million in FY 2020.

The group aims to have annual revenues of around £7 billion in the coming 3 to 4 years.

ASC final results for FY 2021

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The group’s shares closed at GBX 2,141.00, down by 56.00 points or 2.55 per cent on Monday. It had a market cap of £2,139.72 million as of 10 January.

The FTSE AIM UK 50 index ended at 6,210.17, lower by 1.77 per cent.

  1. Brown (N) Group PLC (LON: BWNG)

Brown (N) Group is an online clothing and footwear retailer. It is a part of the FTSE AIM All-Share index.

The group’s H1 2022 group revenue stood at £346.8 million, compared to £347.2 million in H1 2021. Its Adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) stood at £53.0 million, up by 10 per cent from £48.0 million (restated) in H1 2021.

It expects its FY 2022 adjusted EBITDA to be between £93 million and £100 million, due to profitable growth.

BWNG H1 2022 results

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The group’s shares closed at GBX 42.00, up by 0.84 points or 2.04 per cent on Monday. It had a market cap of £193.40 million as of 10 January.

The FTSE AIM All-Share index ended at 1,170.27, down by 1.44 per cent.

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