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Downturn could hit value sector

The value fashion sector is not immune to the downturn in consumer spending, according to a consumer survey by accountancy firm PricewaterhouseCoopers (PwC).

In a poll of 1,000 shoppers, PwC found that 49% would buy fewer items of clothing if they had to cut their spending on fashion. Some 35% said they would buy more items in the Sale while 31% said they would buy fashion items less often.

However, 29% said they would buy from cheaper stores if they had to curb their spending.

PwC pointed to trading performance in the US, where like-for-like sales at value retailers for the year to date are up 2.5% on average against a 0.1% fall for speciality clothing retailers. But there has been a spread of performance in the value sector, with like-for-likes varying from -9.5% to 20.2% for discounters and variety stores.

PwC said the last economic downturn in the UK in the early 1990s resulted in a wide-ranging performance at UK retailers. New Look and Matalan, grew sales and profit margins over the 1990-92 slump. However, retailers such as the Burton Group and Laura Ashley posted declining sales and profit margins for the same period.

Separately, PwC said fashion business insolvencies in the second quarter shrunk by 25% against the first quarter of the year, when insolvencies in the sector hit a five-year high. 71 retailers went bust in the period compared with the 95 that went under in the first quarter.

The data from PwC represents administrations, administrative receiverships, company voluntary arrangements and also creditors’ voluntary liquidations in England and Wales for the second quarter of 2008.

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