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Only the strong will survive the turmoil

It is a sign of the times when a drop in like-for-like sales is considered to be a solid performance but Arcadia Group’s 2.8% drop in the year to August 30 is just that.

In fact, the news was a bright spot in a week when Bank of England governor Mervyn King admitted what we already knew; that we are on the brink of a prolonged recession.

In the face of that, Arcadia’s 6.1% drop in operating profit to £285.3 million on total sales down 0.6% to £1.8 billion, felt pretty good. Arcadia owner Sir Philip Green also revealed that his young fashion businesses Topshop, Topman and Miss Selfridge generated record profits and sales during the 52-week period.

That provided heartening news for that sector but it does speak volumes for what must be happening in Arcadia’s mid-market businesses such as Evans and Wallis when the young fashion trio are booming and group sales and profit are still down. But then that’s no surprise; the mid-market was the first to fall off when the economy started faltering and Arcadia’s businesses are certainly not alone in suffering the effects.

In recent weeks though, it has been more than the mid-market where the mood is darkening. The luxury market, which has so far been remarkably resilient, is starting to feel the pinch according to industry watchers, and this week’s trading has been bad for almost all retailers. Horror stories of negative trading days in some stores prevail as customers who return their purchases outnumber those who buy and keep.

There are no safe harbours in a recession; it’s not about the market you’re in, it’s about which firms are strong enough to weather the storm, and it will soon become clear which ones are.

Lauretta Roberts, Editor

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