Blog: Leonie BarrieChristmas cheer or New Year fear?

Leonie Barrie | 7 November 2007

Are UK retailers talking themselves into a gloomy Christmas? Results released by high street chains Next and M&S this week were peppered with references to the weather – a wet summer and mild winter have been disastrous for clothing sales – and the negative impact of higher energy bills and mortgage costs on take-home pay and spending power.

 But look behind the comments, and it seems there is an upside. M&S, for instance, might have felt its first half growth lagged expectations, but profits still rose 11.5% to GBP451.8m. Apparel sales were up 3.1%, and the company has increased its share of the clothing market to 11.0%. Its store refurbishments are nearly finished, and it is now eyeing expansion in China and India.

And while Next’s results were widely considered disappointing, the retailer is working hard to improve its store environment and the quality of its clothes and expand the home shopping part of its business. Indeed, its Next Directory sales were up 1.2% in the 14 weeks to 3 November, helping to offset a 2.9% fall at its stores.

Or how about Primark – the UK’s second largest clothing retailer by number of garments sold, which saw annual revenues rise 37% to GBP1,602m (US$3,345m), with operating profit up 20% to GBP200m. Proof if ever it were needed that the right mix of fashion and value can certainly weather many a storm.

Also dispelling comments that the retail outlook is quite as gloomy as it might seem – in the short term at least – is new research published this week which suggests conditions are likely to improve for clothing retailers in the run-up to Christmas.

Verdict Research predicts that shoppers will spend more than ever in this festive season, with clothing retailers benefiting from a last minute surge in spending, particularly on products like handbags and jewellery. The timing of Christmas Day on a Tuesday also means many people will leave their shopping until the last three days before Christmas.

However, the downside to this upbeat performance, the researchers say, is that consumers will be forced to tighten their belts in the New Year – making trading far tougher and really giving retailers something to worry about.


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