Housebuilders and miners drag on London markets, Shein overtakes Boohoo and Pepsi faces challenging consumer backdrop

“London markets have had a lot to contend with already this week,” says AJ Bell Head of Financial Analysis Danni Hewson.

“They’re dealing with disappointment that China’s fiscal stimulus potion might not have got the magic quite right, which has taken the shine off miners and luxury goods makers like Glencore, Anglo American and Burberry.

“Then, worries about increasing lending costs and those much-discussed swap rates have stuck a pin in the swelling sentiment that’s given the UK’s housebuilding sector a boost over the last couple of months. Vistry Group and Crest Nicholson were two of the day’s biggest share price losers despite figures out yesterday showing a spike in mortgage approvals and an increasing average house price.

“If would-be buyers have been putting off purchases in the hope that mortgage rates would keep falling, news that fears of inflation and over-exuberant spending plans by a new chancellor have put a spoke in the wheel won’t be met with delight.”

Shein / Boohoo

“Shein has a PR problem. The online fashion giant can’t shake concerns about working conditions or about the impact that its brand of fast fashion is having on the environment.

“If plans to list on London’s stock exchange ever make it past the drawing board it will face increased scrutiny and there will be some investors who will choose to boycott the company on ethical grounds.

“But for its millions of customers who’ve struggled with the cost of living over the past couple of years, its cheap and cheerful offering is simply too good to pass up.

“Many young people will offset their purchases by pairing a five-pound Shein shirt with vintage denim sourced from second hand sites like Vinted or Depop. Shein’s on-trend, low-cost offer has mass appeal and its investment in global delivery hubs makes ordering quick and easy and returns are still free unless you make several separate returns from the same order.

“It’s an understatement to say Shein has disrupted the existing fast fashion world. Companies like H&M and Boohoo have been bruised by its pointy elbows but it’s the latter that’s really in trouble after Shein overtook Boohoo on UK sales for the first time, reporting revenue of £1.55 billion over the past year.

“H&M still has a loyal following and the fact it’s still a traditional bricks and mortar retailer helped retain customers who were looking for that shopping experience after the pandemic.

“Boohoo’s bosses are probably looking for a handkerchief. Sales have tanked, the share price is in the doldrums and rumours are swirling that the company is on the cusp of a massive break-up. It’s carrying too much debt; it’s faced question about the treatment of suppliers; its shopper has been put off by return charges and its offering has somehow fallen out of fashion.

“Think of brands like Topshop, Karen Millen and Debenhams in their heyday. Stores that were beloved by their customers but easily forgotten now they’re not front and centre on our high streets.

“Sometimes big is beautiful and sometimes it’s too unwieldy. In Boohoo’s case it seems like a business that grew too quickly and couldn’t quite figure out how to manoeuvre.”

PepsiCo

“People have changed their eating habits since the pandemic. They want to be healthier; they’re drinking less alcohol and they’re trying to cut back on highly processed foods. They’re also thinking about their wallets and those in-between meal snacks are something many people are choosing to go without.

“Pepsi’s had additional issues to deal with this year after its Quaker brand was hit with a product recall which impacted consumer confidence.

“Price rises it passed onto its customer as inflation shot up created a crunch point when people had to think hard about whether to change habits and cut back or cut out.

“Pepsi’s bosses know they’ve got a challenging period ahead. They need to win back shoppers with twists on old favourites but also by finding new products that resonate with a different type of shopper. So far efficiencies have offset declines in sales volumes, but those efficiencies can only work once.”

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