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HIGHLIGHTS
- Clothing retailers are increasing prices due to higher production costs.
- Associated British Foods (ABF) announced that its subsidiary Primark will be increasing its prices due to inflationary pressures.
Amid sky-high inflation, the wardrobes of people in the UK are also set to get more expensive as clothing companies are now increasing prices to maintain profitability. On Tuesday, British multinational company Associated British Foods (ABF) announced that its subsidiary Primark would be increasing its prices due to inflationary pressures. ABF said that selective price hikes will be implemented across some of its stocks due to rising cost pressures.
Notably, the apparel industry is going through a tough time as people are forced to switch to cost-cutting measures due to the high cost of living in the UK. With the soaring food prices and energy bills, households are facing the biggest squeeze in their pockets. According to data shared by the Office for National Statistics (ONS), Consumer Prices Index (CPI) climbed to 7.0% in the year to March 2022, a 0.8% rise from 6.2% in February. Among the major contributors to the increase were clothing and footwear, whose prices rose by 9.7%.
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Last month, clothing giant Next warned that it might hike the prices in the second half of 2022, adding that fashion prices will jump 6.5% during the period, while homeware items will see an increase of 13%. Another fashion retailer, Marks and Spencer, issued a similar warning, saying that clothes sold through its retail outlets may become expensive.
Why are the prices rising?
The key reason behind the surge in prices is rising production costs, including higher costs of energy and shipping. The unprecedented rise in fuel prices, coupled with global supply chain disruptions, means that retailers will have to either face losses or pass on these extra costs to consumers.
Let us take a look at some apparel-focused stocks and how they have been performing.
Next Plc (LON: NXT)
The British clothing retailer has a presence in over 35 countries and operates both physical and online stores. The company reported a strong performance for the year ended January 2022, with its profits before tax surging to £823 million, a 140% rise over 2020-21.
Next Plc’s shares were trading at GBX 6,085.81, down 0.69% at 11:17 am GMT+1 on 26 April 2022. Its current market cap stands at £8,045.12 million.
Marks And Spencer Group Plc (LON: MKS)
The London-headquartered retailer sells clothing, groceries, and home products. The company recently announced that Stuart Machin would take over as its new Chief Executive with effect from 25 May 2022.
Marks And Spencer Group’s shares were trading at GBX 149.20 at 11:25 am GMT+1 on 25 April 2022. The company's market cap, as of 26 April, stands at £2,997.13 million.
Ted Baker Plc (LON: TED)
The high-street clothing retailer is a constituent of the FTSE All-Share index. Last month, the company announced that it was in talks with private equity firm Sycamore Partners Management L.P for a takeover bid.
Following the speculations about the takeover, Ted Baker's share price has rallied over 20% in the last one month. As of 25 April 2022, the company's shares were trading at GBX 148.18 at 10:40 am GMT+1. Its market capitalisation stood at £274.33 million.
Quiz PLC (LON: QUIZ)
The UK-based womenswear omnichannel retailer has over 300 outlets across the UK, Europe, and Asia. In FY2022, it expects the group revenue to reach approximately £78.0 million and a return to profitability with an EBITDA of at least £4.3 million.
Shares of Quiz Plc were trading at GBX 13.20 at 11:43 am GMT+1 on 25 April 2022, with a market capitalisation of £17.21 million. In the last one year, the FTSE AIM All-Share index constituent has given a return of 33.19% to its shareholders.
Note: The above content constitutes a very preliminary observation or view based on market trends and is of limited scope without any in-depth fundamental valuation or technical analysis. Any interest in stocks or sectors should be thoroughly evaluated taking into consideration the associated risks.
