Blog: Leonie BarrieIs US retail on road to recovery?

Leonie Barrie | 8 February 2010

With January sales at US retail stores showing a marked improvement on the same month last year – even beating forecasts in some cases – the question now being asked is whether the retail sector is finally on the road to recovery?

Better than expected results at many apparel chains and department stores were undoubtedly helped by easy comparisons with last January, when spending fell off a cliff as the recession took hold. And better control of inventories meant they didn’t have to resort to steep markdowns to clear unsold merchandise. Consumer spending in the month even held up despite challenges such as bad weather in many areas.

While all this is good news for the beleaguered sector, analysts warn the recovery is more likely to continue on an uneven path as shoppers only slowly resume spending that was postponed or reduced during the recession. The current first quarter could even be tougher if consumers overspent during the holiday season, they fear.

Tensions of a different kind came under the spotlight in the European Union (EU) last week after China complained about the “unfair” anti-dumping measures taken in December against its leather footwear imports. China wants the issue to be resolved under the World Trade Organisation (WTO) dispute settlement procedure. The European Commission, however, says it took “a trade defence measure” rather than a protectionist one, and that it scrupulously followed WTO anti-dumping rules.

The spat has raised fears that trade tensions with China are likely to escalate in 2010. US rhetoric also links US economic recovery with job creation and trade – but at the same time allocates more funds to trade enforcement.
US: White House unveils more details of export plan
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For Marks & Spencer, problems focus on the hiring of new boss Marc Bolland, after his appointment was calculated to cost the retailer GBP15m (US$24m) to 2012. Details have alarmed shareholder groups, and come at a time when big corporate payouts are under intense scrutiny.

Many stock market flotations were abandoned or postponed in the global economic downturn, but there have been some signs of rekindled interest. Most notably, fashion retailer New Look has launched its much-anticipated IPO (initial public offering), aiming to raise GBP650m (US$1bn) to cut its borrowings and grow the business through traditional retail channels and on the internet.


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