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2009: year of challenge and opportunity

The nail-biting final run into Christmas has prompted an unprecedented level of discounting on the high street and panic among suppliers as to whether their customers would come out the other side of what could be the worst Christmas ever for the fashion retail sector.

House of Fraser chairman Don McCarthy quashed market speculation that the department store was facing a difficult new year because of tough trading combined with its debt levels and its links to collapsed Icelandic banks.

McCarthy said: “This [Christmas] week is no more crucial than last week. At the end of the day the next eight weeks are crucial to all retailers. Trade needs to pick up for all of us. House of Fraser is no worse or better than 90% of the high street. At the moment we don’t foresee any problems.

“We are trading ahead of John Lewis in comparative locations. Trading will continue to be uncertain and we will be conserving cash and cutting expenses.”

McCarthy added that he would be reviewing the performance of some of HoF’s suppliers, particularly in womenswear, in the first six months of the year and that HoF would be “taking a strong stance on underperforming brands”.

He added that five or six store refurbishments were on hold for the first half of next year to help preserve cash. He also pointed to recent negotiations for monthly rents with landlords.

“Our debt to equity level is OK and there is no cash drain on the business,” McCarthy said.

Speculation that Kaupthing, the Icelandic bank which has a stake in Mosaic Fashions, the parent company behind womenswear chain Oasis and Karen Millen, was likely to retain its relationship with the company was also swirling around the sector this week. This would be a welcome relief for many high street suppliers. However, no deal is expected to be finalised until the new year.

Meanwhile, the rest of the high street was focused on fighting for consumers’ limited Christmas shopping budgets in the final days before Christmas.
George at Asda managing director Anthony Thompson said: “Because Christmas will be very late this year, there is still a tremendous amount to play for [in the last week] and there will be a last-minute rush. But I’m not convinced that even more discounting will drive shoppers to buy – it’s the quality of the product mix that will make the difference.”

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