18 January 2018
Retail - Non Food
UK Clothing Retail
Retail
Retail - Non FoodIndustry Update
Europe
United Kingdom
Industry
UK Clothing Retail
Date
18 January 2018
Deutsche Bank
Markets Research
Wrapping up 2017
UK Clothing market -2.1% over 12 weeks to 17 December
The Kantar WorldPanel data today shows 1) a more promotional market with M&S
losing the most full price share: 2) the channel shift continued; and 3) 2017 was
a markedly better year for the clothing market than 2016. The period has been
fully reported for M&S, Next, Primark and Debenhams, but Kantar conrms that
Primark remained the market share winner of the four. Inside we deep dive into
the impact of the recent Sterling appreciation on UK apparel gross margins.
A promotional peak period...
The total market declined by 2.1%, a deterioration from -1.7% in the 12 weeks
to 19 November and a reection that December underperformed what was a
strong September. The data conrms that the market was more promotional than
last year, as widely reported in the press. Discounted spend gained c.250bps
of market share and we estimate this drove the 0.4% decline in average selling
prices. The online pureplays were the fastest growing channel over the period,
with growth of 5.2% against 10% growth in the prior year.
...with M&S losing the most full price share
We set out the market share performance in Figure 1. The large retailers
have already reported for the period, but full price market share data provides
incremental insight into the mid-market's performance. Full price trends
worsened for M&S, Next and Debenhams. M&S lost the greatest amount of full
price share (-36bps vs -9bps in the prior period), while Next held its share at vs
+20bps in the prior period. Debenhams lost 22bps of full price share, which is its
largest decline since November 2016.
Wrapping up 2017
2017 was a better year for UK clothing, as we show in Figure 9. The total market
was at, an improvement of 200bps on the 2016 with growth in both mens
and kidswear. Full price market growth improved by over 350bps year on year
reecting, in our opinion, the shift away from discounting by the mid-market
players. The growth in average achieved selling prices meanwhile accelerated to
1% in 2017, from 0.4% in 2016.
Our clothing sector top pick is A B Foods
Next trades on 12.5x, M&S on 11.4x, ABF on 20.4x and Debenhams on 8.0x
calendar 2018 PE vs the UK General Retail sector (ex ABF, Asos and Boohoo) on
12.4x. See page 15 for more detail on valuation and risks.
Jaina Mistry
Research Analyst
+44-20-754-71337
Warwick Okines
Research Analyst
+44-20-754-58546
Charlie Muir-Sands, CFA
Research Analyst
+44-20-754-75749
Richa Jain
Research Associate
Top picks
A B Foods (ABF.L),GBP2,857.00Buy
Source: Deutsche Bank
Deutsche Bank AG/London
Deutsche Bank does and seeks to do business with companies covered in its research reports. Thus, investors should be
aware that the rm may have a conict of interest that could aect the objectivity of this report. Investors should consider
this report as only a single factor in making their investment decision. DISCLOSURES AND ANALYST CERTIFICATIONS
ARE LOCATED IN APPENDIX 1. MCI (P) 083/04/2017.
Distributed on: 18/01/2018 15:24:08 GMT
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18 January 2018
Retail - Non Food
UK Clothing Retail
Summary
Key charts can be found on page 4, and all charts from this month’s Kantar release
from page 8.
Figure 1: Summary of the Kantar release
12 weeks to 17 DecemberM&SNextPrimarkDebenhamsMarket
Implied sales growth this period-4.1%-2.1%3.1%-1.1%-2.1%
Implied sales growth for 12 weeks to 19 November 17-1.5%-1.1%5.6%-3.0%-1.7%
Total market share this period9.7%7.0%6.1%4.8%
Yoy change in total market share (bps) this period-200315
Yoy change in 12 weeks to 19 November 17 (bps)2442-6
Women's clothing and accessories market share this period11.3%7.0%7.2%4.8%
Yoy change in market share (bps) this period-28-85219
Yoy change for 12 weeks to 19 November 17 (bps)3-964-13
Source: Kantar WorldPanel,12 weeks rolling
This month’s data has already been reported by M&S, Next, Debenhams and
Primark.
Figure 2: Kantar reporting period (in black) vs the most recent period reported by Debenhams, Primark, M&S and Next
Kantar
Debenhams
Primark
M&S
Next
Q1 18, 17 weeks to 30 Dec 17: -0.8% GTV growth
Q3 18, 13 weeks to 30 December 2017: -2.3%
Clothing & Home sales growth
Q4 18, 8 weeks to 24 Dec 17:
+1.5% Next full price brand
sales growth
Q1 18, 16 weeks to 6 Jan 2018: 9% Primark total sales
growth
27 Aug 1714 Jan 1717 Dec 17
12 weeks to 17 December
19 Nov 1722 Oct 1724 Sep 17
Source: Company data
Kantar is next due on 13 February 2018 whilst company reporting is due on:
■AB Foods: Pre-close trading update on 28 February 2018
■Next: Preliminary FY results on 23 March 2018
■M&S: FY results 23 May 2018
■Debenhams: Half year results (TBC)
Page 2Deutsche Bank AG/London
18 January 2018
Retail - Non Food
UK Clothing Retail
Of course, Kantar is only one of a handful of sources that provide data on the
clothing market. A summary of the most recent data points is in Figure 3.
Figure 3: Summary of industry data points
Sales growthSep-17Oct-17Nov-17Dec-17Jan-18 MTD
ONS Textiles, clothing and footwear NSA10.4%0.8%5.3%nana
ONS Textiles, clothing and footwear SA10.5%0.9%5.2%nana
Seasonal effect (implied)-0.1%-0.1%0.1%nana
Barclaycard clothing4.5%-4.1%-0.9%4.1%
Visa clothing & footwear-0.8%-8.9%-2.1%-2.4%
BDO fashion2.7%-7.9%-2.5%-3.8%1.3%
John Lewis fashion8.8%-4.2%1.6%4.2%-1.4%
12 week data rolling:
Kantar WorldPanel CF&A (12 week rolling)*1.5%-0.9%-1.7%-2.1%
Kantar WorldPanel full price CF&A (12 week
rolling) *3.9%-1.3%-3.4%-5.9%
Wider non-food retail:
BRC Non-food (3MMA)0.9%0.1%-0.6%-1.4%
Inflation:
ONS clothing CPI3.3%3.2%3.0%3.1%
BRC shop price index for clothing -5.8%-5.7%-4.6%-6.5%
Source: ONS, Barclaycard, Visa, CBI, BDO High Street Sales Tracker, Kantar WorldPanel, John Lewis, BRC. * CF&A is clothing, footwear and accessories. Aug 17 shows the 12 weeks to 27 Aug, Sep 17 shows 12 weeksto 24 Sep, Oct 17 shows 12 weeks to 22 Oct, Nov 17 shows 12 weeks to 19 Nov and Dec 17 shows 12 weeks to 17 Dec.
Deutsche Bank AG/LondonPage 3
18 January 2018
Retail - Non Food
UK Clothing Retail
Key charts this period (12 weeks to 17 December)
Figure 4: The clothing market declined by 2.1%...Figure 5: ...over a promotional peak trading period, with
discounted spend gaining 250bps of share
-4
-3
-2
-1135
Dec
-14
Mar
-15
Jun
-15
Aug
-15
Nov
-15
Feb
-16
May
-16Jul-16
Oct
-16
Jan
-17
Apr
-17Jul-17
Sep
-17
Dec
-17
UK clothing, footwear & accessories market growthyoy %(12 wk rolling)
-300
-200
-100100
200
300
400
Dec
-13
Feb
-14
Apr
-14
Jun
-14
Aug
-14
Sep
-14
Nov
-14
Jan
-15
Mar
-15
May
-15Jul-15
Aug
-15
Oct
-15
Dec
-15
Feb
-16
Apr
-16
Jun
-16Jul-16
Sep
-16
Nov
-16
Jan
-17
Mar
-17
May
-17Jul-17
Aug
-17
Oct
-17
Dec
-17
Market: change in discount share (bps, 12 week rolling)
Source: Kantar WorldPanel, Deutsche Bank. 12 week rolling, total marketSource:Kantar WorldPanel, Deutsche Bank. 12 week rolling
Figure 6: Online pureplays were the fastest growing
channel, with 5.2% growth against strong comps
Figure 7: Debenhams saw its largest full price share
decline in over a year...
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
20.0
Dec
-13
Feb