Blog: Leonie BarrieDown but not quite out

Leonie Barrie | 6 October 2008

As the UK braces itself for what some analysts believe could be the worst Christmas trading period for at least 30 years, the list of retail failures continues to grow. In the last week alone, administrators have been waiting in the wings at fashion, gift and home retailer Joy, and Sixty UK Ltd, the company behind the Miss Sixty and Energie teen fashion brands.

Savile Row fashion house Hardy Amies Plc is also on the brink of bankruptcy after failing to secure additional funding from its major investor. The couturier has expanded rapidly over the past two years, but has been criticised by fashion experts for failing to modernise its image like rivals Burberry and Aquascutum.

There are also concerns about the health of private-equity backed businesses, like those backed by Icelandic investor Baugur, after one of its affiliated companies with links to collapsed Icelandic bank Glitnir filed for administration. Baugur, which owns a string of retail names ranging from Karen Millen, Oasis and Warehouse to Shoe Studio, Principles and Coast, as well as having stakes in Debenhams, Moss Bros and French Connection, was forced to issue a statement saying it’s “business as usual” for its retail units.

Another measure of just how bad things are, is that a 6.1% drop in second quarter like-for-like sales at M&S is considered good news. Analysts were expecting a lot worse. Clothing sales dropped 3.5%, but the retailer believes it is maintaining market share.

Just like its customers, Marks & Spencer is battening down the hatches and hoping to ride out the downturn. It plans to cut capital spending by up to GBP200m (US$352m) – that’s down to GBP700m this year and GBP400m in the 2009-2010 financial year – slashing its unpopular store modernisation programme and focusing instead on improving its supply chain and information technology systems.

Elsewhere in the UK, there are some signs of life. Chinese retailer and manufacturer Bosideng International is set to buy a 50% stake in Greenwoods Menswear and open 100 new Bosideng shops in the UK. The deal was revealed just days after a joint venture was announced between the two companies.

And high street and catalogue retailer Next Plc has bought women's fashion brand Lipsy for GBP17.4m (US$30.8m) in a move that should help it compete better with rivals such as Asos and Ted Baker which target younger fashion customers. Lipsy's products already feature in the Next Directory, and Next says this will continue – as will its supply deals with existing customers. But it does not plan to sell Lipsy products in its high street stores. 



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