Blog: Leonie BarrieSpending likely to remain restrained

Leonie Barrie | 12 October 2009

On the first anniversary since the sector went into freefall following the collapse of the world’s financial markets in September 2008, it’s perhaps not surprising that US apparel retailers last week posted monthly same-store sales results that in many cases marked their first gains in a year.

Helped by aggressive promotional activity, stronger autumn fashions and cooler weather in many areas and of course strong comparisons with a year ago, retailers could be forgiven for thinking shoppers are finally getting back their appetites to spend.

But amid lots of talk about a recovery, the evidence shows consumers are still watching their wallets, with value retailers the most favoured. And industry experts have cautioned against reading too much into the results, with spending likely to remain restrained for the month ahead, as well as for Halloween and the December holidays.

The changing fortunes of US department stores have also prompted Liz Claiborne Inc to launch a bold new merchandising model to sell its namesake clothing brand and Claiborne-branded merchandise exclusively at JC Penney stores. It also plans to move the Liz Claiborne New York brand out of department stores altogether and onto the QVC home shopping network instead. The women’s wear specialist hopes the measures will boost its wholesale business and take earnings “to the next level.”

Leading British brands and high street retailers, meanwhile, have been criticised for failing to pay a living wage to the workers making their garments – with a new report saying most have no plans in place to raise wages to acceptable levels in the near future. Some have made no more than “vague paper commitments,” according to the latest 'Let's Clean Up Fashion' report from rights group Labour Behind the Label, which names and shames some of the worst offenders.

While they may not fare so well in the sustainability stakes, UK supermarket giants Tesco and Sainsbury’s are motoring ahead on the sales front. Tesco last week said its clothing sales grew 6% during the first half of the year, helping to lift total group non-food sales by 8% to GBP6.2bn. Underlying pre-tax profits rose 8.6% to GBP1.57bn for the six months to 29 August. Likewise, J Sainsbury posted a 3.2% increase in second quarter sales, boosted by revenue growth for its non-food ranges.

Japan's Fast Retailing Co is forecasting a 24.5% hike in profit for the year ahead, after surging sales at its Uniqlo casual clothing chain helped lift operating income to an eight-year high in the 12 months to August. The company said it is also planning ambitious expansion in China, Hong Kong, South Korea and Singapore.

And currency fluctuations and falling sales continue to hit Levi Strauss & Co, but the US jeans giant says it will continue to invest in its brands despite posting a 41% slump in third quarter profit. One bright spot in a quarter characterised by a slowdown in spending by both consumers and its retail customers was higher global sales of the Levi's brand, particularly in the US.


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