In its latest trading update, Next blamed the unseasonably warm weather of November and December for its “disappointing” trading performance over the festive period.
I’d be inclined to expect a similar story from M&S, Debenhams and the like as they update us over the next few days.
That’s not to say all retail and consumer stocks are bad investments, of course.
SuperGroup – another firm due to update investors this month – saw profits rise by more than 50% in the first half of 2015, while shares in Home Retail Group – parent of Argos and Homebase – will benefit from speculation linking it to a takeover by Sainsbury’s.
J Sainsbury itself will give a third-quarter trading statement on 13 January, a day after WM Morrison Supermarkets and a day before Tesco, in what could be a crucial month in determining the health of the big food retailers.
“Clearly Next’s results do not bode well for the rest of the industry, such as M&S,” says Nicla Di Palma, equity analyst at Brewin Dolphin.
“I would expect electronics retailers such as Dixons Carphone to perform better than the clothing retailers, while for the supermarkets its ‘same old, same old’. However, I do believe Sainsbury’s will be the least worst of the three big because it is more differentiated with no need for a massive programme of restructuring.”
While UK retail, and consumer stocks in general, have suffered from tough times over the long haul since the 2008 financial crisis – which claimed many big-brand casualties – investors can still benefit from selective exposure.
