How low can clothing prices go?

By: Leonie Barrie - 9 May 2012 19:44

"Margin-slashing discounting cannot be sustained forever," is how the director general of the British Retail Consortium (BRC) this week greeted figures that showed the price of clothing and shoes on sale in UK stores continued their downward slide in April.

Indeed, not only were they cheaper than this time in 2011, but prices fell by 5.4% in April compared with the same month a year ago.

While this was slower than the 6.5% decline seen the month before, it contrasts with overall shop price inflation rate of 1.3% in April, according to the BRC-Nielsen Shop Price Index. Food inflation slowed to 4.3% in April from 5.4% in March, and non-food reported deflation of 0.5% in April from 0.9% in March.

"After last week's official return to recession, these figures give customers some reasons to be cheerful," said BRC director general Stephen Robertson.

But while this might indeed be good news for shoppers, for retailers it means "drawing on all their tactical tools and tricks of the trade to stimulate volume and support share," according to Shore Capital analyst Darren Shirley.

He adds that "macro-economic worries just do not go away," either, with weak consumer confidence, dismal weather, the return of Eurozone worries, and falling living standards all combining to put UK consumers in a difficult spot.