Blog: Leonie BarrieSpring shopping warms up

Leonie Barrie | 11 May 2009

The later timing of Easter, coupled with warmer weather which boosted sales of spring fashions, helped the beleaguered US retail sector to better-than-expected results in April. This is the second month in a row that same-store sales posted by many chains exceeded expectations – although industry observers still warn against reading too much into the results.

Many stores are still seeing declines, only the rate at which sales are falling is lower than forecast – including Gap, American Eagle, Abercrombie & Fitch, Zumiez and Wet Seal. Discounter Wal-Mart Stores continues to take sales away from rivals as shoppers trade down; and some retailers, including Macy’s, JC Penney and TJX Cos even lifted their first-quarter forecasts on the back of their April performance. But luxury players continue to struggle, with Saks sales down 32% for the month.

However there’s no doubt that while the rate of decline seems to be slowing, shoppers are still cautious amid fears of job losses and other economic woes.

Discussions about signs of economic recovery not surprisingly dominated talks at last week’s World Retail Congress in Barcelona. Stock market rallies and improvements in the housing market have helped improve shoppers' confidence – but industry experts are reluctant to be drawn on when these early gains will extend into a broader uptick for retailers.

They do, however, agree that one of the few saving graces of the current financial crisis is a much-needed makeover of the high street, and that when the global economy eventually recovers, the current model of retailing will have changed for good.

Until then the shakeout continues, with discount retail chain Filene's Basement agreeing to sell most of its stores to real estate group Crown Acquisitions for US$22m after filing for Chapter 11 bankruptcy protection. The company, which was sold by Retail Ventures only two weeks ago to FB Acquisition II, an affiliate of the Buxbaum Group, will continue to operate thanks to the deal, safeguarding thousands of jobs.

And sporting goods giant Adidas is axing its regional offices as part of a restructuring programme designed to lay the foundation for sustainable long-term growth. The revamp, designed to save more than EUR100m (US$134m) a year, was revealed as the German firm posted a 97% slump in first quarter profit. The plans include the closure of its regional headquarters in Europe and Asia. Adidas also intends to grow its own retail business through a dedicated Global Retail organisation.

Likewise, rival sports goods group Puma is to implement further cost-cutting measures after unveiling a first quarter profit of only EUR5.6m (US$7.6m). The costs of the company's previous efficiency drive heavily impacted the figures, with net earnings before one-off expenses down 10.3% to EUR80.8m.

And UK retailer Marks & Spencer was forced into an embarrassing climb-down on its decision to charge a higher price for bigger bras. Faced with a mounting consumer backlash, the firm took out full page adverts in several British newspapers last week admitting "We boobed".



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