“Online sales of clothing are absolutely flying,” echoed di Palma. “Companies like Asos and Boohoo.com seem to know and hit their young target market. But at some point, trends change. The consumer is always quite fickle.”
On the subject of the fickle consumer, di Palma thinks this behavioural tendency coupled with rising inflation means Tesco’s market share is far from secure.
The UK’s biggest supermarket chain, which is a top ten holding for Schroder Investment Management, Legal & General Investment Management and Majedie Asset Management, reported recovering sales over the Christmas period, with like-for-like sales in the UK up by 1.8%. This marks the first time the British food retailer has increased its market share in five years.
“I think the market in general is enjoying a bit of a rebound from the lows we saw two quarters ago,” stated di Palma. “This is a volume-led recovery but the key question remains, what will consumers do in the face of much higher inflation of goods? Will they go back to discounters? Or buy less in terms of volumes?”
Tesco’s shares had fallen by 2.4% to 203.9p, at the time of writing, reflecting the fact that investors’ expectations for the group are running high, said di Palma.
“Christmas is an exceptional time so we need to wait and see what actually happens over the next few months. The reason the share price fell a bit is because chief executive David Lewis is doing such a good job so expectations of the firm are now very high.”
