September 8, 2022
Analysts at JPMorgan Chase & Co. downgraded clothing business Hennes & Mauritz AB and warned about dangers for other retailers, including Marks & Spencer Group Plc, that the cost-of-living problem that customers are currently experiencing has “just just begun.”
Even if the UK energy price ceiling is frozen at the current level, consumer spending on discretionary items may decline by a mid-single-digit percentage in 2023 compared to 2019, retail analysts including Georgina Johanan stated in a note. Without a freeze in energy prices, spending may drop by 10%, they claimed.
New UK Prime Minister Liz Truss’s as-yet-unannounced government support measures “may be considerable, but JPM economists remain cautious this brings a risk of faster rate hikes, simply delaying rather than eradicating recessionary risk,” the analysts noted. For UK customers, “winter is (still) coming,” they declared.
In addition, the experts said that the stronger dollar, increased cotton prices for garment businesses, and rising energy and personnel expenses are all exerting pressure on retailers.
Source: Bloomberg
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