Blog: Leonie BarrieClothing sales driven by Christmas promotions

Leonie Barrie | 16 January 2012

The UK's biggest clothing retailer, Marks & Spencer, has admitted that heavy discounting in the run-up to Christmas has eaten into profit margins - and that it is now eyeing extra cost savings to try to make up the shortfall.

M&S's like-for-like clothing sales rose 1.1% in the three months to 31 December, with its overall performance lifted 2.4% thanks to a stronger than expected performance in its food business. But the retailer insisted it was not discounting in a "distressed" fashion, and that the move had been a tactical one.

Indeed, earlier and deeper promotions were endemic among UK retailers over the festive period according to new figures released last week - helping to lift like-for-like sales values by 2.2% over the previous year. The British Retail Consortium (BRC) also noted that shop prices grew at their slowest pace for 16 months during December.

The victor in the supermarket price war was Sainsbury's, the UK's number three player, which hailed a "record breaking" Christmas period. Its general merchandise and clothing sales outpaced its food business, lifting sales by 2.1% on a like-for-like basis. But shares in market leader Tesco plunged after it admitted to being outpaced by its rivals and warned that UK profits could fall in the coming year. Its UK like-for-like sales were down 1.3% in the six weeks to 7 January.

In other news, purchases by the Chinese government are absorbing a large portion of the 2011/12 global cotton crop, with efforts to rebuild the national reserve likely to lead to a recovery in world stocks. The inter-governmental group the International Cotton Advisory Committee (ICAC), and the US Department of Agriculture (USDA) both believe global cotton stocks could rebound after two seasons of relatively tight reserves.

And sportswear giant Nike said it "commends" one of its Indonesian suppliers after it agreed to reimburse workers more than US$1m in unpaid overtime. The PT Nikomas Gemilang IY plant shoe factory will pay back wages to around 4,500 workers, as well as offer training programmes for the local management team and set up a task force to address grievances.

The settlement comes seven months after manufacturers and brands including Adidas, Nike and Puma signed a pact with textile, clothing and footwear unions that strengthens rights for workers in Indonesian sportswear factories.


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