Blog: Leonie BarrieRetail sales paint too rosy a picture

Leonie Barrie | 23 January 2012

Heavy discounting by clothing and footwear stores in the run-up to Christmas helped UK retail sales edge up in December, according to official figures released last week. Sales volumes rose 0.6% between November and December, the Office for National Statistics (ONS) said, and were 2.6% higher than December last year.

Sales volumes at textile, clothing and footwear stores increased 6.3% from December 2010, when demand was impacted by harsh winter weather. By value, sales in the sector were 8.2% higher.

Analysts, however, warn the figures were skewed by a late rush to the shops at the end of the month - as well easy comparisons with a poor, snow-hit December last year. Shoppers remain reluctant to spend and retailers competing hard on price are seeing their margins suffer as a result.

Indeed, the difficult underlying trading conditions claimed new casualties last week, with value clothing chain Peacocks and the UK arm of children's clothing retailer Pumpkin Patch both calling in the administrators.

Peacocks is the biggest British retailer to enter administration since Woolworths collapsed in December 2008. The business, which operates 611 stores, continues to trade while a buyer is sought, but 249 jobs have been axed at its head office.

Peacocks and Pumpkin Patch join the ranks of La Senza, Barratts Priceless and D2, which have all been placed in administration in the first few weeks of 2012.

While many high street stores are struggling, luxury brands such as Burberry and Mulberry are bucking the trend. Both reported healthy growth over the Christmas period, helped by strong demand at their stores in Asia and from tourists visiting their shops in the West. Likewise, at the other end of the spectrum, discount fashion chain Primark and online fashion retailer Asos also emerged among the winners during the festive season.

In the US, meanwhile, reports suggest the right mix of strong promotions, lean inventories and an emphasis on value helped Christmas retail sales beat forecasts - rising 4.1% on last year to US$471.5bn. Apparel sales performed "extremely well", the National Retail Federation (NRF) said, adding that while the retail industry is set to grow at a faster rate than many other industries in 2012, this growth will be slower than last year.

The Chinese New Year - which begins today (23 January) - is traditionally a time when labour shortages become commonplace as workers head home during the holiday season. To try to prevent this, clothing and textile manufacturers in key provinces say they are raising wages to try to attract and retain workers.


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