Blog: Leonie BarrieAnother mixed bag in May

Leonie Barrie | 7 June 2010

US retailers posted another mixed bag of results in May according to sales results filed last week, putting paid to hopes of a sustained pick-up in consumer spending.

Poor weather early in the month dampened demand for summer merchandise, while a sagging stock market underscored the still-fragile state of the economic recovery. Results were also hurt by the later timing of the Memorial Day calendar, which shifted some sales into June.

Luxury items, jewellery and e-commerce were the fastest-growing US sales categories, but apparel saw a second month of decline with lower sales in all areas except children's clothing. Pricing, though, continued to hold firm suggesting retailers have not had to return to steep discounting.  

While it seems a sustained US retail recovery is still some way off, there are hopes the Memorial Day calendar shift will provide a brief boost to June's results.

For Spanish retail giant Inditex the focus of its growth is on international sales - prompting the group to open its first Zara stores in India as part of a joint venture with Indian conglomerate Tata Group. Describing the move as "a new milestone in the Inditex Group's expansion in Asia," the company is already planning to roll out more locations in the country's largest cities.

The timing of its move coincides with new research that suggests clothing market demand in India is likely to grow at 16.8% per annum between 2009 and 2014 - outstripping the 10.9% growth forecast for Asia and Oceania as a whole.

But one of the biggest problems facing overseas retailers making a move into India is the need to find a domestic partner. And here US retail giant Wal-Mart is lobbying the Indian and US governments to relax the rules prohibiting foreign investment in consumer-facing multi-brand retail channels.

Unlike their US counterparts, many apparel retailers in Europe have seen sales remain surprisingly healthy throughout the recession. But this could all be about to change, as moves by several European governments to slash their debts via tax hikes and public spending cuts also start to curb the region's clothing business. For suppliers, the likely slowdown in demand coincides with rising costs.

For more than 40 major apparel retailers and vendors, including Macy's, Sears/Kmart, Target, Kohl's, JC Penney, Guess, Victoria's Secret and Saks the focus is on setting new industry-wide standards limiting lead in handbags and other fashion products including footwear. The pledge comes as part of a $1.7m legal settlement with the Oakland, California-based Center for Environmental Health (CEH).

COMMENT: Bumpy ride continues for US retailers in May


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