Blog: Leonie BarrieThe first steps towards a recovery?

Leonie Barrie | 6 April 2009

Investors appear to be giving Marks & Spencer the benefit of the doubt, with shares rising 11.7% after the company reported better-than-expected sales during its fourth quarter.

Even so, the figures don’t make for easy reading – and it’s perhaps a sign of just how bad things have got at the UK’s largest clothing retailer when a 4.8% drop in like-for-like general merchandise sales (which include clothing and footwear), and a 1.0% fall in UK clothing sales is seen as good news. Compare this, though, with falls of 8.9% and 6.5% respectively in the third quarter, and it’s perhaps easier to see where the optimism is coming from.

There’s also the question of whether or not these are the first tentative steps towards a recovery. Executive chairman Stuart Rose says the retailer has managed to cut costs by sourcing more efficiently and is attracting more mature customers with new lines like Portfolio.

Things are also looking up for British fashion chains Topshop and Topman, which have finally made their American debut with a new flagship store in New York. The four-storey location in Lower Manhattan was originally due to open in autumn 2008, with the delay blamed on construction and building permit problems.

The opening is believed to be part of a planned US expansion for Topshop’s parent company Arcadia – although trying to make its mark in a recession will be no easy task for the retailer.

The economic downturn has taken its toll on German CAD/CAM supplier Assyst-Bullmer, which confirmed to just-style that it has filed for bankruptcy after failing to renegotiate terms with its lenders. However, the company said it was talking with a number of possible buyers, and was confident it would be sold as a going concern.

President Barack Obama has outlined a new initiative that proposes to set up reconstruction opportunity zones on the Pakistan-Afghanistan border to produce items such as clothing that would enter the US duty-free. The zones are among a number of plans to try to reduce terrorism in the region – but the idea that US apparel importers would place business in one of the most inaccessible and inhospitable areas on earth is seen as far-fetched by some.

The US has also vowed to take "swift action" against countries that erect non-tariff barriers to trade, and said it would prioritise and tackle "the most significant" obstructions to US exports. The latest annual National Trade Estimate Report submitted to Congress outlines the main barriers to US trade and investment in the last year. 

The release of the report came in the same week that China raised the export rebate on textiles and garments by another percentage point to help the industry cope with falling demand and weaker prices. The new increase to 16% came into effect on 1 April, and applies to fabrics and garments made from silk, wool, cotton, and man-made fibres.

 


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