Brexit is the subject plenty of us would like to see the back of this Christmas, such has been the devastating effect of the prolonged and potentially-destructive saga on stock market sentiment.
No sector has been struck more ferociously than the retail segment, a theme I covered in some depth when looking at some of the FTSE 100’s biggest players.
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Retailers of all shapes and sizes have been shocking the markets in recent weeks. Bonmarche (LSE: BON) showed that not even the niche or value retailers are safe from the storm currently battering the high street. The business last week advised “the current trading conditions are unprecedented in our experience and are significantly worse even than during the recession of 2008/9.”
The retailer, which specialises in fashions for more mature customers, cut its full-year profits forecasts because of “extremely poor” trading before Black Friday and disappointing sales since the retail event. Bonmarche’s share price fell to fresh record lows in response and it could recently be seen dealing at 37p per share, down a shocking 72% since the turn of the year.
This fresh news bodes badly for fellow low-cost clothing retailer N Brown (LSE: BWNG), too. I’ve argued in times gone by that, like Bonmarche, the Jacamo and Simply Be owner can rely on its specialist product ranges — in this case plus-size fashion — to help it weather the worst of conditions.
My school of thought came crashing down in October, though. The business, in response to adjusted pre-tax profits sinking 5% between March and August, slashed the interim dividend in half and also warned of a similar cut for the final dividend of the current fiscal year.
No recovery in sight
Not even the fast-growing online segment, an area in which N Brown has been investing heavily over the past several years, can be expected to ride to the rescue of the retailers in the current climate.
This point was gloriously illustrated by ASOS this week, whose share price dropped a shocking 38% on Monday after the FTSE 250 firm cut its own profits and sales forecasts for the year. The internet giant advised of “a significant deterioration in the important trading month of November” and added that “conditions remain challenging.”
I’d add that conditions are in danger of deteriorating further as the UK is dragged closer and closer to a dreaded no-deal EU withdrawal come March. For this reason I’d be happy to overlook N Brown and Bonmarche’s big dividend yields of 9.2% and 16.8% for 2019 and sell out today.
They might be dirt-cheap, both businesses carrying forward P/E multiples inside the widely-considered bargain benchmark of 10 times and below. But they’re cheap for a reason and it’d take a braver man than me to buy into the given the economic and political uncertainty in the UK. I can see their share prices continuing to sink in 2019, and possibly beyond.