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, totalling£12 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 by£5 million in the third quarter from the dollar's weakness, with more to come.
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