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Fashion flotations are sunk by the economy's fragile reality

One of the most common refrains I hear from retailers is that the much-trumpeted economic recovery has not reached them yet.

It’s especially true the further away from London one gets. The capital is in a bubble, and central London is a bubble within that bubble.

Despite what George Osborne and the Treasury spin doctors would have us believe, it’s still tough going for most in our splendid trade. Perhaps the best that can be said by many is that it is not as bad as it was immediately after the financial Armageddon of 2008, but that is scarcely cheering news. It seems that menswear retailers are, as usual, finding the going even tougher than their womenswear counterparts, but trading reports are - in another telling sign of the times - inconsistent from one day to the next. It is sad to have to report so regularly on once-successful retailers closing their doors.

Another manifestation of the fragility of the economy has come during the past week with the shelving of the proposed flotations by lifestyle brand Fat Face and etailer The Hut. The latter insists it is merely postponing its IPO, while Fat Face has not indicated when or if it will return to the stock market fray. Anthony Thompson and his team, who have done such an amazing job at turning around what was a near-basket case, probably need to show a couple more years of steady growth before the investor community will reckon Fat Face is a good bet for fat returns.

I like The Hut chief executive Matthew Moulding’s description of the current market conditions and its “incredibly frothy valuations”.

There has been plenty of hot air - like the steam used to create a cappuccino - around some of the recent retail entrants to the listings. But it must be galling for a fashion-focused trader like The Hut to be suffering because of the disappointing performances of Card Factory and Pets at Home.

One of the more extraordinary episodes of the recent rush to scoop up investors’ cash has been the post-listing performance of Bagir, the Israeli supplier best known for selling suits to Marks & Spencer. It raised £28m on the London stock market’s Aim in April, but just four weeks later posted a profits warning after its largest customer - generally accepted to be M&S - reduced its orders, presumably as part of its new, more efficient sourcing policy that sees it cutting out middlemen.

It seems a bizarre state of affairs, if true, that M&S did not think to mention this change of direction to Bagir as it prepared to float.

Or that Bagir forgot to mention it to would-be investors if it did have an idea that its biggest customer might not remain so. For the record, Bagir has denied it knew anything about M&S’s plans before the flotation. When the bad news broke, Bagir’s share price dropped 64% in a day - from the IPO price of 56p to a paltry 20.5p. (It had “soared” back to 24.5p by Wednesday this week). With these sorts of shenanigans going on in fashion and retailing, no wonder investors are going cool on the sector.

On the plus side, there is this week encouraging news on expansion and refurbishment from department stores as varied as Selfridges and Elys of Wimbledon. Mark Newton-Jones is figuratively rolling up his well-tailored shirt sleeves to get Mothercare back into shape and Moss Bros is trialling a “digital showroom” (something formerly known as a small shop) as part of its own impressive growth plans.

At Drapers we always look sensibly on the bright side, and see plenty of reasons to encourage youngsters to join the industry. On June 3 and 4 we are holding a Drapers Careers Week (slight journalistic licence there) via Twitter. Join in on @Drapers using #DRcareersweek.

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