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For real performance look beyond the headlines

Julie Carlyle, member of the Institute of Chartered Accountants in England and Wales’ (ICAEW) retail auditor community and Ernst & Young head of retail.

Julie Carlyle

Julie Carlyle

We have seen some strong results from premium fashion retailers, although further down the value chain the like-for-like sales announcements have been scarcer. While they are one key indicator for the sector, it is important to look beyond these top-line figures.

The pressure on fashion retailers, department stores and supermarkets to produce positive numbers after the Christmas period is extreme, as these data tend to get a lot of attention. However, in a recent ICAEW report, retail auditors from the UK’s six largest audit firms warned about over-focus on retailers’ like-for-like sales.

The pre-Christmas period saw a variety of promotional strategies, including some early and deep discounting. Heavy discounting means like-for-like data may mask real performance. Like-for-likes also say nothing about margins.

Another issue is that there is no standard way of calculating the data, making like-for-likes unsuitable for direct comparisons.

Customer experience will always be important. However, with the shopping experience becoming increasingly digital, success also depends on retailers getting their channel strategy right.

This means adapting to the world of convenience in buying and receiving goods that consumers demand, such as clicks-and-bricks and click-and-collect. Also important to fashion retailers is having good reverse logistics and offering flexible return options.

Changing business models provide challenges to retailers. Many are grappling with real clarity on which retail channel is driving sales and whether consumers have looked in store before buying online, or the other way around.

This can hamper the ability to make quick, responsive business decisions and understanding their likely top-line and margin impact.

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