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I think 2019 could be the turning point for high street stocks

The UK’s physical retail sector is in a critical state, we know that. We’ve had crises at House of Fraser (since snapped up by Sports Direct International), Debenhams, and more recently Superdry. Now our retail fears have apparently been confirmed as the first figures from the Boxing Day sales are in.

Retail analyst Springboard has reported that footfall across the nation’s stores at the sales had fallen 3.1% by 4pm on Boxing Day, marking the third year in a row of declining volumes. That’s not the full day, of course, and it doesn’t include online sales, but with sales discounts being hiked increasingly further year-on-year, it doesn’t look like good news for the shops.

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Online too

Though we don’t yet have any online sales figures, that sector of the retail business is not immune from the tightening of consumers’ belts, as the slump at ASOS has shown. ASOS, a pioneer of online fashion sales (and still a great growth prospect in many investors’ eyes) has seen its share price fall 45% since the release of a profit warning on 17 December — and the price is down 67% since the start of 2018.

But I don’t actually see Boxing Day sales weakness as such bad news, and I think 2019 could be better than expected, for a couple of reasons.

Changing habits

One is that Boxing Day is becoming less important as a shopping day, with attempts to part buyers from their cash starting earlier in the year these days. It’s surely not mere chance that the decline in Boxing Day sales has been coincident with the UK’s adoption of the US Black Friday tradition.

The other, as already hinted, is the increasing move to online sales. According to Barclaycard, almost 70% of people it surveyed who intended to shop in the Boxing Day sales planned to do so online, from the warm comfort of their own homes rather than trudging round the cold outdoors.

Some good news

And even for actual bricks and mortar shops, the news isn’t all bad. London often leads the way with retail trends, and West End shops were apparently reporting a 15% rise in footfall compared to Boxing Day 2017. Admittedly, Oxford Street might seem like a more tempting prospect than many provincial town centres, and some discounts were apparently very high this year. But I think retail investors should still take cheer from it.

How has the market reacted to these first snippets of information on the post-Christmas retail scene? Not with horror.

Don’t panic

Shares in Marks & Spencer started a shade under 1% up as the market opened after its Christmas break, so there’s no obvious panic fallout there from these early Boxing Day results. Next shares opened with a 1.5% gain, so it’s perhaps attracting a shade more optimism — and that wouldn’t surprise me, as it’s always looked like a better investment to me.

Looking to the big two in online fashion sales, ASOS shares opened up 1.1%, beaten by Boohoo with a gain of 1.8%. In fact, other than a couple of red figures, the retail stocks picture is mostly coloured green as I write these words on the morning of 27 December.

Early gains are mostly ahead of the FTSE 100 too, so I don’t see any need for post-Christmas retail panic.

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Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended ASOS. The Motley Fool UK has recommended boohoo group and Superdry. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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