A slow decline in consumer expenditure on both clothing and footwear, the rise in popularity of buying clothes from grocery superstores, and the introduction of new, lower budget clothing stores, have all taken their toll on the profitability of clothing retailers as a whole. So says a new report that analyses and compares the financial performance of 104 leading apparel retailers in Great Britain.

The report, entitled 'Clothing Retailers' and published by The Prospect Shop, covers the last three accounting years (1996/97 to 1998/99), and provides individual company and sector analysis - general clothing, men's wear, ladies'/children's wear - as well as performance averages for the industry as a whole.

Of those companies analysed during this period, average sales increased by 23 per cent to £55.1m. However, profits dropped 10 per cent to £3.5m.

All profitability ratios have followed the same pattern of year on year deterioration throughout the analysis period, clearly pointing to a definite trend of decline says the report.

The pre-tax profit margin of the industry as a whole fell from 8.7 per cent in 1996/97, to 8.2 per cent in 1997/98 to 6.3 per cent in the final year, 1998/99. Return on capital saw a larger decrease, falling from 36.6 per cent in 1996/97 to 32 per cent in 1997/98 to end the period on 24.5 per cent.

Stalwart retailers such as Marks & Spencer, Bhs, Littlewoods, Next, and Etam have all shown declining pre-tax profit margins in their 1998/99 accounts (the last year that can be truly analysed in the report). However, other retailers as diverse as La Senza, Mackays, Whistles and Mothercare also experienced declining pre-tax profit margins in the final year, 1998/99.

On a more positive note, some clothing retailers were found to be bucking the profitability trend. Ted Baker Plc was placed at the top of the 'top ten' most profitable clothing retailers by pre-tax profit margin 1998/99, with a result of 24.6 per cent - almost four times the industry average of 6.3 per cent.

The Business Ratio report on 'Clothing Retailers' is published annually by The Prospect Shop.