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Signs of a thaw in consumer spending

Jessica Brown

The focus on preserving margin is likely to continue

While the heavy snow might have ground much of the country deep into January blues (and frozen retail sales), the fashion sector is still celebrating what has been a fruitful festive period.

While last year’s trading statements were characterised by large-scale sales falls on top of melting margins, this year has brought a rather different story.

Tightly controlled stocks meant pre-Christmas discounting fell to much lower levels, protecting profits and forcing shoppers to buy must-have items at full price. Shoppers with tracker mortgages had more disposable cash and brought a boost, while the impending VAT rise got the consumer psyche into “spend now” mode.

Department stores appear to have performed particularly well, thanks in part to the cold weather but also to their aspirational ranges and although young fashion started the autumn season slowly, sales thawed bringing record performances from the likes of Supergroup and Republic.

But the real category winner was footwear, with several specialists reporting their best Christmas for five years. The reason? Well, the sector benefited from last year’s consolidation, but there was also an incredible boot season, led by Ugg.

Though the next few months are likely to be challenging, those with a great product, price or service proposition will trade through. But with what strategy?

Marks & Spencer executive chairman Sir Stuart Rose this week forecast that the retail sector would show no growth this year, which could result in a bloody battle for market share. Certainly the focus on preserving margin that characterised Christmas is likely to continue for some time yet.

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