UK retail sales continue to be challenging as values fell 0.7% during a desperate January.
According to the latest figures, retail sales in the UK will contract this year, so it will be vital for retailers to have a sound strategy in place to help them keep their market share and weather the storm.
UK fashion tycoon Sir Philip Green (pictured here) of the Arcadia Group cited speed of the supply chain rather than price as the only way to stay ahead in the current economic climate. Sir Philip said in a radio interview that customers would be focussed on quick turnaround of stock and newness in product, rather than on price. Separately Marks and Spencer has warned retailers not to panic and not to abandon their core brand values in the recession. New Look reportedly said retailers will have to share some of the burden with consumers. For those businesses that struggle to further reduce costs and gain extra market share, it would be “counter-intuitive to charge higher prices when consumers' budgets are stretched." Meanwhile Next chief executive Simon Wolfson said his company was negotiating with suppliers to absorb some of the impact of the weak sterling.
The general retail sector has been derated by business analysts since Christmas and in the last week, two IPO (Initial Public Offering)floats have been pulled in the fashion sector.
New Look, which was scheduled to publish its IPO prospectus last Monday to raise £650m of new shares through the flotation to reduce its debt, has now pulled the process in view of unfavourable market backdrop. It is understood that investors have expressed concern over the fast fashion retailer’s ability to grow further in the UK and that its international expansion story is unproven.
The news came as value retailer Matalan also pulled its sale process after interested parties balked at the £1.5bn price-tag set by founder John Hargreaves.
All eyes are now on fashion group Supergroup, which owns young fashion brands Superdry and Cult, which has outlined intentions to float.
Meanwhile UK department store retailer Debenhams is reportedly planning to shed 170 jobs from its Irish retail operation.
According to market analyst Verdict Research, the forecast for UK retailers remains gloomy, with gross domestic product (GDP) growth set to shrink by 2.2% this year and consumer spending in retail falling by 0.7% – the first time Verdict has recorded negative growth for this figure. Verdict director Neil Saunders said at a recent conference that this downturn will be worse than previous ones because all sectors will be affected. The wave of unemployment will move from the financial sector to manufacturing, where it has already hit, and on to services before finally reaching the public sector. Unemployment is set to peak in the first half of 2010 at 3.1 million. "Consumers will become more demanding, particularly about service,” he explains. “For retailers, maintaining market share will be critical and it will be harder to make gains,” according to Saunders.
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