River Island chief executive Richard Bradbury has warned that the young fashion sector has “worse to come” as slowing consumer spending starts to filter down from the middle market to younger shoppers.
River Island this week reported a sales rise of 8.4% to £727.4 million for the year ended December 31 but saw profits fall 2.7% to £152.3m. Trading has continued to be challenging since the year’s end.
Bradbury said: “The whole market is much tougher right now. Guys are having to choose whether to put an extra tenner in their car tank or spend it on beer rather than coming out to buy a T-shirt. The price of everything is going up and that is affecting all consumers across the sector now.”
Bradbury said he was “quite happy” with last year’s performance given the retail slowdown which he said started last autumn. He said that operating profit ratio to sales was 20.9% against 22.9% the previous year – towards the top of the sector – and denied the chain had lowered prices or increased markdown activity this year.
He said: “We expected it to be tough and we’ve budgeted for it. I’m not sure we’re quite at the worst of it yet and we’re looking at this lasting for 18 months to two years.”
He added: “For autumn, we’re not expecting big ticket items like coats to sell. It just depends on what happens next [in relation to the economy] so we’re generally running the business very prudently.”
However, Bradbury said that he would not be switching strategies and would continue to invest in new stores and refurbishments this year, as well as relaunching the River Island website.
He said: “River Island started up in a recession – we’ve been through tough times before. We are still investing in our estates and still taking new stores. We don’t have any plans to change our position. There are still some fashion trends that are performing strongly.”
The British Retail Consortium reported like-for-like retail sales were down 0.4% in June. It said that fashion sales had fallen back sharply since the milder weather in May. Last week, value retailer Primark said its sales had also slowed.
However, earlier this week Sir Philip Green said that young shoppers had helped to send sales at his Arcadia chain through the £1 billion barrier. Although he conceded that life on the high street was not easy he said there were still some pockets of growth.
Green said: “It’s not all bad news. The younger generation is obviously not quite ready to change their lifestyles. The proof is we are seeing double-figure like-for-likes on Topman and significant gains on Topshop and Miss Selfridge.”
New Look chairman Phil Wrigley added: “I do think that young fashion is slightly advantaged as I also think that fashion with sharper prices is advantaged. I believe that we are trading better than the market overall. However, the market is difficult and has all the hallmarks of a recession. We budgeted for it to be difficult so we believe we can make progress year on year, but we will focus more on the younger customer because they have less exposure to the economic factors.”