Spiralling cotton costs could push prices higher, but retailers are bullish about trade after Easter.
Retailers have not ruled out further price increases for autumn 11 but said tough trading conditions at the start of the new year would be alleviated after the first quarter.
This week, retail bellwether Next, which said last year that prices would rise by up to 8% for spring 11, refused to rule out the possibility of further hikes in the second half of the year. The warning came on the eve of the autumn 11 trade show season, which kicks off at Pitti Uomo in Florence next week.
Next group finance director David Keens said: “Cotton prices continue to rise. We’ve fixed prices for the first and second quarters but we can’t go beyond that. It is possible, if cotton prices continue to rise, that prices may have to be increased further.”
Speaking as the middle-market chain revealed a 6.1% slump in like-for-like sales over the period from August 1 to December 24, Keens said the potential price increases could suppress like-for-like sales growth during 2011 and that combined with the VAT increases and public sector cuts, the outlook for the year was “uncertain”.
Brian Brick, chief executive of menswear retailer Moss Bros, said price increases for autumn 11 were inevitable. “For autumn 11 we’re putting up our prices. I don’t know how much yet,” he said. “I’m cautiously optimistic for this year. People’s money is going to be tight but we have been getting our house in order - we’re a different company to a couple of years ago - and there’s far less competition out there. We’ve got to be optimistic.”
Many multiple and indie retailers told Drapers that, while the first quarter would be challenging as customers contended with the gloom surrounding the increase in VAT to 20% and looming public sector job cuts, from Easter onwards trading should bounce back.
Mike Shearwood, chief executive of Aurora Fashions, which includes womenswear chains Karen Millen and Oasis, said: “Our trading over the Christmas period was lower than we forecasted because of the weather, but we still achieved single-digit like-for-like growth. The first quarter will be tough due to the amount of negative press about the nation’s financial situation, but I expect to see things recovering from April. We are still forecasting for positive like-for-like growth this year.”
The chief executive of one department store said his experience of the Christmas trading period was like “night and day” when compared with Next and that like-for-likes were up by high single digits over the period.
He added: “The VAT increase is a red herring, it is talked up. It is convenient for people to make excuses. Consumer confidence will be hit for the first part of the year but they are still spending. In the second half of the year people will have got used to the job losses and cuts.”
Gary Lever, co-owner of young fashion indie Duo Menswear in Gourock, near Glasgow, said: “The VAT effect remains to be seen - the view I’ve got on it is the press and the media hypes it up. If someone is going to pay £45 for a polo shirt, then they’ll pay £46.”
One womenswear retailer’s chief executive said: “I don’t think the VAT rise was a big deal.
“We believe that, on balance, January and February will be quiet, and have bought accordingly. It will be a tough couple of months.”
Nat Wakely, director selling operations at department store chain John Lewis, which saw like-for-likes increase 7.6% in the five weeks to January 1, said: “There will have been an element of demand which has been brought forward. We will mitigate that by not introducing the VAT rise until the end of the Sale [on January 16]. From the end of clearance through to March trade will be slower but it will build over the year. Absolutely there will be growth in the year.”
Daniel Rubin, executive chairman of footwear retailer The Dune Group, said: “We are up a few percentage points over the 10 weeks to Christmas. This week is going strong but we will see it tail off as there’s been a lot of negative sentiment. We’re not anticipating trade to be good for the next three months but if you’ve got the right product it will be OK.”
Murray Eversham, website manager at designer menswear indie Pritchards of Hereford, said: “There has been a good reaction to our new stock which we put out just before Christmas. We are optimistic for this year - we’re not cutting back. We’re actually trying to get more brands in.”