Blog: The week that was...from slowdown to meltdown
Leonie Barrie | 13 October 2008
As the global financial meltdown accelerated to fever pitch in September, worried consumers have finally gone into hiding – as the slumping monthly sales results published by US retailers show all too clearly. Luxury stores, mall-based apparel stores and department stores continue to be the hardest hit, while discount retailers like Wal-Mart are among the few beneficiaries as shoppers focus their spending on necessities like food and fuel.
Just how much worse things are going to get is a grey area for retailers as they hurtle towards the holiday season, traditionally the biggest shopping period of the year. The rescue plans proposed by the US and other governments over the past week seem to have restored some confidence to the markets. But even so, with economists warning there will be no fast or easy solution to the health of the financial system, retailers are unlikely to have little Christmas cheer to look forward to.
In the UK, Icelandic investment firm Baugur Group took further steps to alleviate concerns about the health of the company and its UK fashion brands following the collapse of three Icelandic banks. CEO Gunnar Sigurdsson stressed that the financing of the companies behind its UK investments – which include the Whistles, Jane Norman, Oasis, Warehouse and Karen Millen fashion chains – is “unaffected” by the banking crisis.
But credit insurer Coface has withdrawn cover for some of the company's suppliers amid fears over the unravelling situation in Iceland. The loss of credit insurance means suppliers would not be protected if the retailer should go out of business.
The insurer has also withdrawn credit insurance from suppliers to retailer JJB Sports over growing concerns for its future. Last month, JJB’s auditors cast "significant doubt" on the company's ability to continue as a going concern.
Just 18 months after taking its first tentative steps into the luxury market, apparel maker Liz Claiborne and Narciso Rodriguez are to go their separate ways after struggling to agree on how to develop the designer’s namesake brand.
Liz Claiborne bought a 50% stake in the Narciso Rodriguez trademark in May 2007, and said it was keen to extend the brand in non-apparel and licensing categories, as well as increased international distribution and even its own stores. But it is thought this strategy clashed with the designer’s high-end vision.
The challenges of building Rodriguez's business also come at a time when Liz Claiborne is distracted by its own problems, including a second quarter loss of US$23m and attempts to reinvigorate its Mexx fashion business in Europe.
Meanwhile on the trade front, a US lawmaker has asked the government to start monitoring textile and clothing imports from China next year in a bid to pre-empt any sudden surges in imports when existing restrictions are lifted at the end of this year. House Ways and Means Committee chairman Charles B Rangel (D-NY) wants the formal textile and apparel import monitoring program to collect data on currently quota-protected products – and says the information will be used to evaluate whether the imposition of safeguards is an appropriate next step.
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