Asos (LON:ASOS) and Marks & Spencer (LON:MKS) share prices drifted upwards on Tuesday after an upgrade by Deutsche Bank (ETR:DBKGn) analysts. Asos shares rose slightly to 397p, higher than the year-to-date low of 323p. It remains about 60% below the year-to-date high of 1,011p.
Marks & Spencer shares, on the other hand, are hovering near their highest point this year. They have jumped by over 175% from the lowest point in 2022, making it the best-performing British retail stocks this year.
In a report, analysts at Deutsche Bank said that they were optimistic about the UK retail sector, which has come under pressure recently. Besides, there are signs that the country’s inflation is falling, which could trigger more spending in the near term.
The analysts noted that Marks & Spencer’s years of restructuring are now starting to bear fruits as its revenue and profitability rises. In the most recent results, MKS said that its profit before taxes rose from £205.5 million in the first half of the year in 2022 to over £360 million. Its profit soared to over £325 million as food sales surged by 14.7%.
In the statement, the analysts noted it was a work-in-progress company and that they expect it to boost its margins and sales in the long term. The management is working to boost its profitability, modernise its supply chains, and reduce inventories. It has also changed its commercial model.
Asos and companies like Boohoo (LON:BOOH) are facing numerous challenges. One of the biggest challenges is the rising competition by a company like Shein. In October, Shein acquired Misguided from Frasers, the parent company of Sports Direct (LON:FRAS), House of Frasers, and Everlast.
Shein hopes to use Misguided to boost its presence in the UK and compete with the likes of Asos and Boohoo.
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