Blog: Hannah AbdullaOutlook for UK retailers looks bleak

Hannah Abdulla | 11 March 2019

The outlook for UK retailers continues to look bleak. UK department store John Lewis blamed a "challenging" retail backdrop for a more than 45% drop in full-year profits to GBP160m. It was a similar story for rival Debenhams, which issued a warning on full-year profits based on poor sales performance. In an update, the retailer said for the 18 weeks to 5 January, gross transaction value fell 5.6% and like-for-like sales were down 5.7%.

On the acquisition front, a trade union has rallied more than 3500 signatories for a petition that urges the UK competition watchdog to block a merger between supermarkets Asda and Sainsbury's. The GMB union says the price shoppers and workers could face as a result of the merger is "simply too high".

Over in the US, L Brands is being urged by activist investor Barington Capital Group to spin off its Victoria's Secret brand, in a move Barington says will "meaningfully improve long-term value for shareholders".

Speciality retailers Gap Inc and The Children's Place moved to acquire the Crazy 8 and Janie and Jack brands from rival Gymboree in a US$111m deal. However, the move was called "defensive" by one analyst who added the retailers were looking to prevent another competitor from stepping in and attempting to rebuild the businesses. 

Indian textile and viscose staple fibre manufacturer Grasim Industries – part of conglomerate Aditya Birla Group – announced the acquisition of the Indian arm of Söktas, a Turkish manufacturer of shirting fabric for INR165 crore (US$23.5m). Grasim says the move will grow its presence in the Indian cotton market.

In global trade, the US has confirmed it is eyeing duty-free apparel access in a future trade deal with the UK, in order to improve competitive opportunities for exports of US textile and apparel products while taking into account import sensitivities. Meanwhile, apparel trade bodies from the US and Canada are pushing for swift ratification of the United States Mexico Canada (USMCA) trade pact, adding the agreement allows apparel and footwear companies access to the "diverse supply chains", required to meet the expectations of customers in today's retail environment.

On the supply chain front, non-profit group the Fair Wear Foundation (FWF), has said a joint approach from all actors in the apparel industry is required to tackle harassment in garment factories worldwide. But a new paper from the Ethical Trading Initiative (ETI) says a shakeup of the current business model is the only thing that will improve conditions for workers at the very end of the supply chain. The upcoming Association of Suppliers to the British Clothing Industry (ASBCI) conference will cover ethics in the fashion supply chain, and aims to find "practical solutions to difficult problems". It will look to answer whose responsibility it is for cleaning up the industry.

In other news, the success of a pilot which uses blockchain to trace organic cotton from farm to gin could pave the way for a new end-to-end traceability solution not only for organic cotton but for other preferred fibres. Jean-maker Levi Strauss rolled out its latest capsule collection of responsibly made products featuring a new form of "cottonised hemp" denim and Ted Baker's founder and CEO Ray Kelvin resigned from the company.

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