Retailers are celebrating a windfall as the weak dollar delivers a boost to margins on goods sourced from the increasingly important Chinese market.
The benefit will be especially welcomed by hard-pressed fashion retailers after difficult recent trading. Many are likely to hang on to the savings rather than pass them on to shoppers.
The pound was worth US$1.82 on Tuesday after reaching a high of US$1.85 earlier this month. Retailers are now able to source product from China at a lower cost, because the Chinese renminbi is pegged to the dollar. More than 5 per cent of all UK imports originate in China and Hong Kong, totallingÂŁ12 billion.
According to Close Brothers Corporate Finance, clothing retailers' net margins could be boosted by as much 5 per cent. Director Alka Bali said: 'The average clothing retail intake margin in 2003 was 60 per cent, when the rate was US$1.65 (to the pound). With the current rate, the average intake could increase to 65 per cent.'
Oasis finance director Richard Glanville said: 'It's a significant benefit.
We are now covered and have given rates to our buyers up to August. I suspect we will keep the margin - we don't put our prices up when the dollar is up.'
A Dixons spokesman said: 'I think this is a dividend for many retailers. It (the dollar) is a popular currency for buying and selling components, and it's a benefit that can potentially flow through to lower margins or lower prices for consumers.'
Kingfisher said it benefited byÂŁ5 million in the third quarter from the dollar's weakness, with more to come.
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