Fund Team: Consumer & Retail Update

Lester Tan, Consumer & Retail Sector Leader 2015-16

For the Consumer & Retail sector, we believe that the industry will enjoy a good year for 2016. Given that unemployment rates in the UK has fallen to a seven-year low of 5.4%, as well as 5.1% in the USA, we expect greater consumer spending for the upcoming year on both retail goods and services.

2015 saw the industry grew by approximately 4.5% compared to the previous year and that momentum is expected to gained further traction led by greater consumer confidence, lower rate of employment and the overall effect of households worldwide benefiting from higher household incomes. Major concerns for the year would include worries of a further slowdown in the Chinese economy as well as the possibility of UK leaving the EU.

In terms of stocks, some of the stocks the team has shortlisted recently are ASOS, Netflix and Seven and I Holdings.

ASOS is one of the stocks the team has highlighted. The firm has an extraordinarily high P/E ratio (66.9 on 20 Jan) relative to its peers like Bohoo and N Brown, which suggests it has high growth potential. This is supported by the company’s plan to expand its warehouse capacity and reach out to more non-UK markets. 58% of ASOS sales are from outside the UK and the company is aiming to increase this further, and especially EU. ASOS has been very focused with their strategy, which has strongly supported its growth and market share. The company’s robust management team has improved their services continuously and kept up-to-date with their customers’ technological demands. Their share price is relatively expensive but is currently far below its peak, so we believe it is a safe pick to BUY.


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