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Retailers need a storming Christmas

Caroline Nodder

That phrase ‘the perfect storm’ has started to crop up again in conversations I’m having with people across the fashion business.

That phrase ‘the perfect storm’ has started to crop up again in conversations I’m having with people across the fashion business. It’s a worrying term for the numerous factors that are all simultaneously impacting on sales and I must say I haven’t heard it repeated this often since 2007, when of course we were on the brink of recession. One leading retail boss was telling me this week how he now views the UK as three separate economies – London, cities outside London and “the rest of the country”. My contact, who runs a sizable multiple retailer, even suggested the Government should look to stimulate the toughest of those three – the “rest of the country” – by introducing a preferential VAT rate.

It’s an interesting idea, if hugely complicated to implement. He also pointed to other pressures including the property issues with bricks-and-mortar estates and the debt on many of them that now outweighs the value significantly. This is effectively like half the industry being in negative equity, making it impossible to sell the sites even where they are underperforming or in many cases making a loss. This albatross around the neck of the fashion retail sector looks unlikely to go away until the property market recovers, which won’t happen while the sites are making a loss, and so the vicious circle continues.

Christmas is therefore looking crucial for the industry. The warm weather, however, has already driven a lot of retailers into promotions and these look set to be central to Christmas sales as shoppers hunt out the bargains or hold back till the last minute to get the best prices. Like-for-likes will look good compared with the snow of last year – providing we don’t see a repeat – but nevertheless trade will have to be very good indeed to make up for the past three months, which have been a real washout for many.

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