Retail

Jul-Sep24 Retail Channel Checks: Sports brands drive promotions, Fashion discount end

• Our retail channel checks from July to early Sept24 indicate ongoing promotions for Sports Brands, while Fashion disc. ended in mid-Aug24.
• We expect manageable inventory days for MAPA, though there are concerns on margins.
• MIDI’s SSSG in Aug24 remained strong at 12%. We maintain an Overweight rating with pecking orders: MIDI> MAPI> ACES> MAPA.

MAPI’s Fashion Discounts Ended in Mid-August24

Our weekly retail channel check, covering early July to 1st week of Sep24, indicates that mid-year sales have already started, particularly in the fashion segment. The Inditex group brands began offering increased discounts from early Jul24, with sales continuing through the end of the month and further reductions. However, from mid-Aug24 to early Sept24, we observed fewer discounts on fashion items.

MAPA’s Ongoing Promotions on Sports Brands

In contrast, MAPA’s sports brands continue to run promotions, such as end-of-season sales and payday events. Our checks noted that discounts have varied, with up to 80% off at Sports Direct’s clearance sale in Jul24 and offers like B1G1 or B1G2 in other stores. Several mono-brand stores also offered 20-30% discounts, depending on the promotional theme.

Expect manageable inventory days for MAPA but concerns on margins

During Jul-Sep24 period, overall discount levels were lower than during the pre-Ramadan season in 1Q24 and the May-Jun24 period, when discounts reach as high as 70-80% for certain sports brands (with fashion brands offering up to 50% off). We believe the continued promotions on MAPA’s sport brands will help manage inventory days (1H24: 178 days vs our FY24F: 185 days), though it raises concerns about the impact on 3Q24 margins.

ACES: Boom Sale and Thematic Promotions to Support FY24 SSSG >=7%.

Between July and early Sept24, ACES launched several promotion campaigns, including the “Boom Sale” (extended to 6 Aug24), Independence Day and the thematic “Kitchen Fest” promo in early Sept24, which coincided with the 9.9 e-commerce offers. ACES plans to discontinue the use of the Ace Hardware brand, which will incur additional costs in 1H25 (around +1% to 1.5% increase from the initial A&P exp. of 1-1.5% of rev.). We believe the minimal rev. contribution from the Ace Hardware brand (<1%) will allow ACES to achieve our FY24-25F EPS growth of 10% yoy and support mid-to-high SSSG, with FY24F guidance at >=7% (vs. 9.8% for the 7M24).

Maintain Overweight, Pecking Order: MIDI> MAPI> ACES> MAPA

The Jul24 Retail Sales Index rose by 4.5% yoy, surpassing both Jun24 of 2.7% and BI’s expectation of 4.3% yoy. Clothing sales rebounded in Jul24, growing by 3.4% (up from 0.5% in Jun24), and BI projects even stronger growth of 5.9% yoy in Aug24, which bodes well for MAPI’s fashion segment. In addition, MIDI reported a continued strong SSSG of 12% yoy in Aug24 (vs 1H24: 9.4% and 2Q24:5.8%) and forecasts 3Q24 SSSG will reach 11% yoy. We maintain our Overweight rating on the sector, with our pecking orders as follows: MIDI> MAPI> ACES> MAPA.

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