Must read: UK shop price inflation, Vodafone, Shein/Missguided

GLOBAL MARKETS

In the final day of trade for the month, European markets are trading cautiously higher with the FTSE 100 lagging, dragged down by BP (LSE:BP.) after its earnings missed expectations, sending shares in the oil giant sharply lower. The cap on bankers’ bonuses in the UK ends today, sparking a mixed reaction and reversing rules introduced after the global financial crisis. France’s economy grew by 0.1% in the third quarter, marking a slowdown from growth of 0.6% in the previous quarter.

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Overnight, China’s official NBS manufacturing PMI hit 49.5 in October, breaking below the 50 boom-bust divide from 50.2 in the previous month, representing a decline in activity and a miss versus expectations.

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Kicking off a busy week for central banks, the Bank of Japan kept its short-term interest rate on hold at -0.1% but slightly adjusted its yield curve control. The Japanese yen is trading lower against the euro and the US dollar, extending this year’s decline.

UK SHOP PRICE INFLATION

Annual shop price inflation from the British Retail Consortium dropped to 5.2% in October, the lowest level since August last year and down from 6.2% in the previous month. This was the fifth straight month that shop price inflation eased.

Food price inflation fell for the sixth consecutive month to 8.8% and non-food inflation declined to 3.4%. Helen Dickinson, chief executive of the BRC, said: “Imported goods saw higher levels of inflation due to a weaker pound, still-high producer costs and emerging trade frictions, while prices for some domestically produced foods, such as fruit, were lower compared to last month.” Dickinson also said: “To keep inflation heading in the right direction, it is vital that the government does not burden businesses with unnecessary new costs.”

Shop price inflation continues to travel in the right direction, although food price inflation is still stuck more than four times higher than the Bank of England’s 2% target, highlighting that there is still a long way to get back to more sustainable, lower levels for price increases. Retailers have been trying to keep a lid on their price rises in an attempt to uphold demand amid the sluggish consumer backdrop as rising interest rates and the broader macro pressures take their toll. However, they are trying to balance this against preserving margins during a period of elevated cost pressures.

VODAFONE

Vodafone Group (LSE:VOD) is selling its Spanish arm to Zegona for $5.3 billion as the telecoms company looks to refocus itself towards its more profitable markets. Vodafone has struggled to make strides in the Spanish market where CEO Margherita Della Valle had announced a strategic review earlier this year. Della Valle, who took to the helm in April has been trying to start a new chapter for Vodafone after a period mired by its lacklustre performance. In June, under her watch, Vodafone finally announced plans to merge its UK operations with those of CK Hutchinson in a bid to boost its presence in the UK. Today’s divestment is the second major deal under her watch.

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This year has seen heavy job cuts in the telecoms sector with Vodafone and BT Group (LSE:BT.A) among those axing roles as the sector grapples with heavy business costs. Vodafone has been trying to become more efficient while delivering 5G to its customers. But investors are still struggling to get excited about the stock, with shares down by over 25% over the last 12 months and are trading lower again today.

SHEIN/MISSGUIDED

Chinese fast fashion group Shein is purchasing UK rival Missguided from Frasers Group (LSE:FRAS) for an undisclosed amount. This is the first acquisition of a British label by Shein as it looks to penetrate the UK retail market and pursue its global growth strategy.

In a rare move for the highly acquisitive Frasers Group, it is in fact offloading Missguided. At the same time, Frasers has been building stakes in other fashion e-commerce labels ASOS (LSE:ASC) and Boohoo Group (LSE:BOO), highlighting that despite this disposal, Frasers remains committed to the sector. However, perhaps Frasers is now pivoting slightly in terms of its strategy, offloading some non-core assets when the time is right.

Both Shein and Missguided have been criticised over their rock-bottom price tags, raising questions about whether they are encouraging throwaway fashion rather than promoting sustainable, environmentally friendly long-term purchases.

The deal draws attention to Shein’s global growth ambitions, already operating in more than 150 countries as it looks to expand its UK market footprint. Last year the company was worth around $100 billion and was reportedly the most Googled clothing brand in 2022. It has harnessed a highly successful online strategy, using influencers on TikTok and other social media platforms to spur customer demand.

Shein’s entrance into the UK is worrying for the incumbent fast fashion players such as Asos, Hennes & Mauritz (OMX:HM B), Boohoo, and others. Competition is heating up and Shein has a huge customer appeal thanks to its ability to keep up with the latest trends and offer rock-bottom prices, which are particularly attractive at a time when consumers are feeling the squeeze.