Blog: Leonie BarrieThe eye of the Christmas trading storm

Leonie Barrie | 22 December 2008

The week ahead will find retailers at the eye of the Christmas trading storm, with seven out of the ten top grossing days of the holiday season all occurring in the eight-day period from 19-26 December. However, even the most bullish of predictions provided by the US’ National Retail Federation is forecasting a 2.2% increase in holiday sales to US$470.4bn – the slowest growth since 2002.

Other observers are even more pessimistic. ShopperTrak expects a record low 0.1% increase in sales and a frankly depressing 9.9% drop in foot traffic, while The NPD Group found that more than a quarter of consumers were planning to spend less this Christmas – prompting a prediction of flat to declining sales.

It’s a similar picture in the UK, where private equity firm Silverfleet Capital, the owner of discount department store TJ Hughes, is warning of bleak times ahead for retailers in 2009. It believes consumers will continue to trade down to value and discount retailers, and there will be lots of merger and acquisition activity in the form of distressed purchases, refinancing and equity injections.

The predictions are little consolation to UK retail chain Woolworths, which is to close all 807 of its stores by 5 January, with the loss of 27,000 jobs. The administrators say more than 300 Woolworths stores are under offer from food, clothing and value retailers, along with interest in brands such as Ladybird children's wear – but it is increasingly unlikely there will be a last-minute bid for the business as a whole.

Other firms are responding to the tough economic climate and the downturn in consumer spending by trying to reduce costs. This is seen in the form of job losses at apparel maker VF Corp’s jeanswear and services groups, while US children's wear retailer The Gymboree Corporation is to cut the salaries of its senior management by 10-15%.

International Textile Group, meanwhile, is realigning its Cone Denim and Burlington Worldwide divisions to create a single business group called ITG Apparel & Specialty Fabrics. The company says the move to combining its apparel resources into a single unit "provides a simpler, more robust platform to leverage our strengths and offer customers greater support within a more flexible, cost-competitive structure."



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