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Spring’s healthy sales bring cautious optimism

Fashion retailers are cautiously optimistic that the economy is stabilising, but said trade remained volatile despite a strong April.

Both high street and independent retailers told Drapers this week that spring sales were ahead of the forecasts they had made following the collapse of US bank Lehman Brothers last October, and that sunnier weather had not only persuaded shoppers to part with some cash but had also lifted the general consumer mood.

However, none of the retailers contacted by Drapers were prepared to nail their colours to the mast and call the bottoming out of the recession, largely because the threat of rising unemployment still looms. By contrast, Next chief executive Simon Wolfson told the City the recession had “bottomed out” at a Next trading update last week when he reported sales were ahead of expectations.

Similarly, figures from the British Retail Consortium this week showed that fashion retailers had seen the strongest rate of growth since October 2006, while footwear retailers recorded their best month of growth for 12 months.

Although comparisons with last year are difficult to draw because this April brought warmer weather and Easter fell later in the calendar, there was a feeling that there was a small shift in shopper sentiment.

Value chain matalan“>Matalan’s chief executive Alistair McGeorge said: “Economically, I am not sure there are any green shoots with two million people unemployed. However, although people are no better off, things do seem to have stabilised a little and people are feeling a little bit more confident. I don’t think things are getting any worse, but I’m not sure there are any fundamentals to bank that on, so let’s wait and see.”

Another high street executive said: “Trade is still volatile but I would certainly say I am feeling better than I expected to feel at this point in the year. With last year’s comparisons and the later Easter, it is hard to see exactly where we are though. It helps that the high street looks quite fresh at the moment with a lot of quite interesting and varied trends.”

Richard Kirk, chief executive of value retailer Peacocks, agreed: “Although I see some green shots, it’s not over yet. For a clothing retailer it is about comparisons and the weather. Last week was difficult for most. However, the picture across the whole season may look better.”
House of Fraser chairman Don McCarthy added: “Most retailers have come out of April OK. Looking back, it hasn’t been as bad as it could have been or what we thought it would be in October or November last year.”

Mark Bage, owner of designer indie Sarah Coggles in York, said trade had improved in recent weeks but he also urged caution.
Lisa Montague, chief operating officer of luxury accessories label Mulberry, said that while tourism had boosted business, she was still planning cautiously for 2009/10.

Three cheers for spring optimism

The Met Office forecast

Temperatures are likely to be above average in the UK this summer, with rainfall forecast to be at average levels or below. This is good news for retailers, who see higher footfall in good weather as consumer confidence and mood are both lifted. It should also drive sales of summer fashions.

The rise and fall of sterling

As Drapers went to press, the sterling climbed to its strongest rate (USStory text.53) against the dollar since January 9. Analysts are predicting the recession could bottom out in the autumn if the rise marks the start of a trend. If the pound remains weak overall, UK brands should see exports rise.

Tourism and staycations

Visitors to the UK from China, Nigeria, Kuwait, Saudi Arabia and the UAE are expected to climb this year and average spend is also up as tourists take advantage of the weak pound. At the same time, UK residents are expected to spend more of their holidays at home in the UK, which should boost domestic sales.

Cause for optimism?

Derek Lovelock Chief executive, Aurora Fashion
“It’s difficult to tell, but I welcome any cautious optimism, especially from the media. That will certainly support any upturn or any improvement that we might be currently seeing.”

Don McCarthy Chairman, House of Fraser
“Most retailers have come out of April OK, and it has been much better than we anticipated. You always get a boost in spring - Easter makes a big difference. But looking back, it hasn’t been as bad as it could have been.”

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