UK: Debenhams says inflation rise tricky to pass on
Department store retailer Debenhams cautions that if a UK recovery fuels an inflation spike, retailers will find it difficult to pass that on to consumers.
Addressing the Retail Week Conference in London, Debenhams CEO Rob Templeman emphasised the importance of value and differentiation that would be as important post-recession as during it.
"We believe inflation in commodity markets will filter through, but if the economy stays tough it will be hard to pass that on," he said. "Brand strength and quality will be as valuable as value and price.
"Average earnings growth has been declining for the past 18 months. We hear lots of commentators talk about deleveraging, but what they are doing is saving money rather than paying off debt."
Templeman cited a raft of economic indicators such as historically low interest rates that could stimulate growth, although he warned of a possible further dip in the UK's fortunes.
Britain's imminent general election has created a climate of uncertainty - witness the slump of sterling against the dollar and Euro recently - and parties of all political complexions could choose to raise direct or indirect taxation.
High unemployment could yet see further fallout on the UK high street, although the Debenhams boss stressed his group had performed particularly well in the teeth of the recession.
"People will spend money in all our shops if we give them reason to," he said. "We have got to go after market share gains which are an indicator of the financial state of the business. We have invested for the upturn and will continue to open new stores."
And Templeman echoed a familiar refrain at the conference; namely that shipping costs for his goods were rising at an extraordinary rate, while commodity prices were also increasing.
"There is no doubt there is massive shipping inflation," he said, adding: "Shipping costs are rising 150%-200%."
The Debenhams chief also urged those at the top of the retail chain to take more notice of what was going on at grass roots level.
"The answers are always on the shop floor," he noted. "People on the shop floor are totally bemused we can't see what they can see."
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