Blog: Leonie BarrieRetailers weather January's storms

Leonie Barrie | 7 February 2011

US apparel retailers managed to shrug off the harsh winter weather seen across many parts of the country in January, posting surprisingly strong revenue gains in a climate that many observers feared would put consumer spending on ice.

Not only that, but several companies were also able to beat estimates and even raise fourth-quarter earnings forecasts. And worries that heavy markdowns would be needed in January to clear excess inventory seemed to be unfounded, as shoppers clamoured to snap up winter merchandise and spend the gift cards they received during the holidays.

One of the undoubted winners was clothing retailer Gap Inc, which raised its full-year guidance after January sales were up 6% on last year. In another significant move, the firm is shaking up the management at its core Gap brand in a bid to position the unit for global growth - with outlet executive Art Peck taking over as the new head of Gap North America.

The San Francisco-based retailer is also centralising its creative resources, including design, marketing, fashion public relations, and production, in a Global Creative Center in New York. And it is planning to merge its Outlet division with the Gap and Banana Republic brands.

Meanwhile in Egypt, where a fortnight of protests continues despite talks at the weekend between the Egyptian government and opposition groups, the US$2bn a year garment export industry has been struggling to cope. But even though ports are closed and plants are working shorter hours, if at all, factories are still producing clothing and textiles and international clients have yet to cancel any orders, just-style has been told.

And fears that rising cotton prices have been driven by speculators on world markets rather than supply and demand have prompted the main US cotton exchange to introduce a new rule that makes it more difficult to trade large quantities of the fibre. The Intercontinental Exchange (ICE) last week approved the measure, which requires investors to prove it is "economically appropriate" if they want to buy or sell more than 300 contracts, or 30,000 bales of cotton.

The cost of cotton and its availability in the year ahead is one of topics addressed in this month's management briefing. One thing is sure, according to industry experts consulted by just-style: and that is pressure on prices is here to stay. Also covered are ways in which firms can try to alleviate some of the pain within their supply chains, and opportunities for the retail sector.


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