Blog: A mixed bag of consumer spending

Joe Ayling | 27 April 2009

Last week gave mixed signals about whether consumers are downtrading in their clothing spend, while luxury brands face pressure to lower some of their price points.

British fast fashion chain Primark - currently the cheapest of the cheap - boosted revenues 18% during the first half of the year after a strong Christmas.

However, supermarket giant Tesco said that its clothing sales had declined 2% during the past fiscal year, although in its defence the retailer's overall profit reached an all-time record high of GBP3.23bn (US$4.7bn) during the period.

Perhaps there were signs of Tesco's dip in clothing sales when the Cherokee brand it licenses delivered lower FY sales and profits were dragged down by Tesco in the UK and Target in the US earlier this month.

It seems that even value supermarkets are no safe havens in the current downturn, and that cash-strapped consumers favour specialist fashion outlets for that rare shopping trip.

At the luxury end of the spectrum, Burberry and PPR posted their quarterly sales results last week, with both having to ride the storm as margins were squeezed by fewer sales at lower prices.

Burberry did, however, manage to increase revenues 2% in the first half, thanks largely to its expanding retail operations in the UK, US and Europe.

Meanwhile, French firm PPR settled for a 2.6% reduction in first quarter sales given the "deterioration and volatility of its operating environment". The company was also forced to issue a statement to "categorically deny" rumours it would sell its Gucci Group subsidiary, whose revenues fell 3.4% despite a 21% hike in emerging markets during the first quarter.

Finally, US luxury goods retailer Nordstrom confirmed to just-style last week it was laying off a total of 72 staff at two US contact centres. The job losses were attributed to a business upgrade that improved efficiencies at its Cedar Rapids, Iowa contact centre, coupled with slower sales.

The current downturn has raised the bar for retailers in both the value and luxury sectors, but while some revenue is being lost to competitors, a good amount seems to be vanishing into thin air as customers tighten their belts.

By Joe Ayling, news editor.



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