Blog: Leonie BarrieJune's retail washout

Leonie Barrie | 13 July 2009

US retailers are still struggling to shake off the recession, with June sales of summer fashions mired by wet weather, fears of unemployment halting discretionary spending, and none of the tax rebate cheques that helped boost purchases last year.

Most worryingly, perhaps, the weak sales cut across all formats, from discounters to department stores. Target Corp and JC Penney both saw sales slide, but raised their second-quarter guidance; while Abercrombie & Fitch, Children's Place, Limited Brands and Gap all disappointed with slumping same-store sales. At the luxury end of the market, Neiman Marcus sales tumbled 20.8%.

June marks the start of summer clearance as retailers try to make room for autumn merchandise. And with most consumers still seeking out bargains or basics, it is likely they are stalling any purchases in preparation for steep discounts in the sales – and that retailers will have a tough time for most of the summer.

With no sign of an uptick in sight, there are also worries about the back-to-school season – the second-biggest shopping period of the year.

In marked contrast, Japan’s Fast Retailing has lifted its full-year forecasts after profits for the nine months to May jumped by 24%, helped by better-than-expected sales at its low-cost Uniqlo casual clothing brand. Net income rose to JPY49.6bn (US$534m) thanks to a 17.2% year-on-year hike in net sales to JPY537.0bn. The company's core Uniqlo stores in Japan - which account for around 80% of total revenues - saw sales rise 22.8% in the three months to May.

And UK sportswear retailer JJB Sports hit the headlines for all the wrong reasons after it emerged the company's executive chairman had received a GBP1.5m personal loan from Mike Ashley, the owner of arch rival Sports Direct. The loan raises questions of possible conflicts of interest - but JJB said the money was for business rather than personal use.

Meanwhile, loyal shareholders in Marks & Spencer voted to keep Sir Stuart Rose running as its chairman until 2011, flouting plans by rebel shareholders to  bring about changes in the company's corporate governance strategy. The vote took place at the retailer’s AGM in London last week. M&S has faced criticism for appointing Sir Stuart as both executive chairman and chief executive – with critics arguing it is against corporate governance guidelines. However, it seems unlikely the issue will be dropped.



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