Blog: Leonie BarrieA kick-start to spending?

Leonie Barrie | 1 December 2008

Retailers are doing everything in their power this year to get shoppers to start spending. Black Friday kicked off the US holiday shopping season, and was marked by pre-dawn openings and steep discounts that stores hope will be too much for consumers to resist. Preliminary research suggests footfall will be marginally lower than last year – but the key question is will Americans shop? And can this be sustained through to Christmas?

The British government is hoping to kick-start its economy with a package of emergency measures that includes cutting VAT by 2.5% until the end of 2009. It has been met by a mixed reaction, since for consumers the cut will effectively mean a GBP2.50 price reduction on every GBP100 spent – a drop in the ocean according to many analysts.

They point out that retailers such as M&S and Debenhams have already cut prices by more than 20%, so another small reduction will make very little difference. And there are fears that implementing a new VAT rate will be a logistical nightmare for retailers at their busiest time of year. Every label will need to be replaced and changes to IT systems will be costly and complicated to implement.

But it’s too late to save casual clothing retailer Steve & Barry's, which is to close its remaining 173 stores, liquidating $250m worth of stock in the process. The decision comes just three months after investment firms Bay Harbour Management and York Capital Management bought Steve & Barry's for $168m, a month after it filed for Chapter 11 bankruptcy protection.

And beleaguered UK retailer Woolworths has gone into administration after running up debts estimated at GBP385m (US$594m). Administrators say "a number of parties" have expressed interest in buying all or part of the company, which has about 800 stores throughout the UK, employing some 25,000 people.

Other brands that have changed hands, meanwhile, are Kellwood’s Hanna Andersson and Gerber Childrenswear businesses which have been sold to private equity firm Sun Capital Partners for $179m. The two businesses, which were not core to Kellwood's women's wear operations, will now operate as stand-alone units.

As part of plans to create a global supply network to support the roll-out of its stores around the world, Japanese retail group Fast Retailing is setting up a joint venture company to make fabric and garments for its Uniqlo casual clothing chain in Bangladesh. The US$80m deal will also help the retail giant reduce its reliance on China, where around 90% of all Uniqlo products are currently made.

US retailers and importers have welcomed the news that a third and final review of apparel imports from Vietnam has led the US Commerce Department to conclude there is insufficient evidence that the country's apparel shipments are being unfairly priced. The import monitoring program is now set to conclude at the end of the current Administration. 


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