Clothing supply fiasco could hit results
For the first time, analysts have forecast that problems over Chinese import quotas will put UK clothing retailers' trading performances at risk. Pundits said Marks & Spencer's and Next's second-half performances are vulnerable.

Investec analyst Matthew McEachran believes that the cost of retailers' stock rapidly piling up at warehouses over the past month, together with the need to source spring/summer ranges, will pose a threat to financial forecasts.

McEachran said the cost of sourcing textiles beyond China is likely to rise, as other regions struggle to keep pace with the rapid growth in demand from clothing retailers.

This problem is likely to be compounded as retailers find it difficult to source products on time, creating clothing shortages on the high street. McEachran said this increased cost might not be passed on to shoppers, taking into account the tough spending climate.

McEachran explained: 'We have scoped out the risk to forecasts as being 1 per cent to 5 per cent of second-half profit, depending on the relevance through product or supply mix. We believe that Marks & Spencer's numbers are most at risk, not least because of its high market share of bras. Next should be less at risk than M&S for opposite reasons. Elsewhere, the likes of Matalan, Mothercare and other value retailers could be affected to some degree, while even JJB or JD Sports could have stock consignments caught up in the bottlenecks. Private operators such as Bhs and Primark are also set to suffer.'

Seymour Pierce head of equities Richard Ratner was scathing of the EU's handling of the affair. He said it is unlikely that any textile manufacturing jobs in member states will be saved.

He added: 'While no one at present can quantify the damage, it cannot be good news for the clothing stocks. Worst affected among the quoted players are likely to be Next, Matalan, Primark and M&S - although M&S says it buys through Hong Kong and therefore is not subject to quotas, it is no doubt a good excuse for a poor third quarter.'

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