Clothing and Footwear Pricing ‘Double Whammy’!

Annual deflation in clothing and footwear rose to 6.5% in June on BRC-Nielsen Shop Price Index.

The value of retail sales in May fell 1.1% compared with last May, and textiles, clothing and footwear was the worst performing category, down 8.4%, according to the Office of National Statistics.

Coupled with the fact that cost prices have increased due to the weak pound, clothing and footwear retailers are getting hit  from all sides and there seems to be no sign of an immediate respite.

It would seem the volume of sales are fairly static with the May’s 8.5% drop in sales accounted for by the 6.5% deflation and VAT reduction but it’s still a huge hit on the margins. Philip Green (Arcadia Group) has concerns about how the general public will react to the price increases coming through in the Autumn ranges reflecting the poor exchange rate on imported goods.

It may well be that the public do not accept the new pricing levels with many choosing to wait for the inevitable discounting to start. This could well mean that ‘Mid Season ‘ sales and 1 day ‘events’ may start even earlier this Autumn – particularly as the September rents become due.

If you are still trading today, I guess you have already adopted many of the survival techniques and tips from earlier blogs. All your costs are under control, staffing levels at a minimum, maybe negotiated with your landlord and received some concessions, so it’s only left for me to remind you to ensure that you keep your stock levels under control and try and keep some of the budget back for last minute ‘deals/offers/special purchases’ from your suppliers to boost your margins.

Stick at it – it’s going to be a long haul – but the good times are coming again – slowly!

Today’s news that 7 out of 10 Woolworth’s stores are still lying empty is not good news for the already beleaguered High Street. Interestingly while more than half the Woolworths stores in Greater London have been let, 80% of sites in Scotland, and 90% of those in the North East are still empty. Although some good news (for retailers) is that landlords have been forced to offer reduced rents and incentive packages to let the shops, causing a drop in high street rents across the board.

Perhaps it’s time to relax some of the planning rules as there still seems a demand for A3/A5 units in the High Street but Local Councils are still trying to push back the incoming tide and  restrict access. In my local High Street Nandos were refused a change of use on a large unit which has remained empty for nearly 2 years. If you can’t attract a ‘traditional’ A1 user then it must be better to allow change of use to ‘revitalise’ the area, create employment and get in extra taxes.

Tony Heywood – Gilcrest Services Ltd
Retail Troubleshooter
Business Turnaround and Recovery

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