Retail in the emergency room as it faces the harshest trading conditions since the 1990s, with the worst still to come
Retailers are experiencing the toughest trading conditions since the early 1990s and the climate is likely to worsen, store chiefs warned this week.
Some of the industry’s biggest names delivered a gloomy verdict in a week that brought a profit warning from electricals leader DSGi and the administration of value fashion group Ethel Austin, with the loss of 181 head office jobs and 33 store closures.
BRC data also revealed the worst retail sales for two years and the worst fashion performance in almost a decade.
Icelandic investor Baugur’s decision to hoist a for-sale sign over value clothing group MK One, which made a loss last year, was taken as another sign of how difficult retailing has become. Ossian Retail, which owns fashion chain Interna穯nale and homeware outfit Au Naturale, was reported to be on the brink of administration. And JJB Sports is axing 800 jobs.
Littlewoods chairman and fashion grandee David Jones expected home shopping to be resilient, but said the sector in general was reeling. “I can’t remember it being as bad as this, I truly can’t,” he said.
“One thing I am sure of is more businesses will go bust. I have no crystal ball, but there will definitely not be recovery this year.”
His pessimism was echoed by George Davies, creator of seminal businesses including Marks & Spencer’s Per Una and Next. “It is as tough as it has been in the past 10 to 15 years,” he said.
Peacocks chief executive Richard Kirk said trading conditions were harsh, but strong fashion retailers would emerge intact. He said: “Unquestionably, we are in a recession, but the huge declines are not all about that – they are about needing to be a good retailer in the first place.
“How do retailers trade through? They have to change. They have to be of a certain size and critical mass. Those that have struggled recently haven’t been able to compete.”
Davies advised: “You have to go on the attack – be more creative, do things that are more exciting for the consumer.
“You can’t take what you have done in the past as good enough. I am now immersing myself in product. Hold your nerve and fight through it.”
Childrenswear retailer Adams’ chairman John Shannon thought his market would be relatively protected during the downturn, but said: “You need better products at better prices – and that will mean reduced margins to counteract fall-off in sales.”
The concern about consumer confidence hasn’t just affected fashion retailers. Carphone Warehouse founder Charles Dunstone said consumers must be suffering “credit strain”, but added he had yet to notice a big effect in stores.