JP Morgan downgrades fast fashion retailers

JP Morgan has downgraded Asos and a clutch of other European retailers on Tuesday, on the back of the mounting cost of living crisis.

The bank, which also reduced its rating on fellow fast fashion firms Boohoo Group and Primark-owner Associated British Foods in the UK, said “cracks” in discretionary spending were now emerging, with around 15 European retail profit warnings in the last month alone.

It continued: “While spend in some areas, including clothing, currently remains solid as the consumer makes up for lost time, we expect this to deteriorate rapidly in the second half, as the catch-up effect wanes and impacts on disposable income start to bite more acutely.”

JP Morgan added that with earnings momentum “set to remain a greater driver of near-term sector performance than a potential longer-term valuation, we therefore remain cautious across our entire coverage with few expectations”.

Asos, AB Foods, Boohoo and Germany’s About You were all cut to ‘neutral’ from ‘overweight’. The bank is now ‘overweight’ on just two European general retail stocks: online greeting card firm Moonpig Group and Zara-owner Inditex.

As at 1315 BST, shares in Asos were off 4% at 841.0p, AB Foods was down 2% at 1,612.5p and Boohoo was trading nearly 5% lower at 62.18p. Moonpig was down 1% at 218.0p.