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Retail Spotlight - The turbulence continues for fashion retailers


Posted At: 21 February 2018 16:43 PM
Related Categories: Retail, Retailers


Nearly a fifth (19%) of UK clothing retailers are showing “early warning signs” of insolvency, according to accountancy firm Moore Stephens. Out of 35,078 fashion retailers surveyed, 6,580 were showing early signs of financial distress, including a large fall in revenue and poor payment history.

Moore Stephens cited a fall in consumer spending together with growing payroll costs as compounding the pressure on bricks-and-mortar fashion retailers, already struggling to compete with their online pure play counterparts.

High street brands holding their own

FSP’s post-Christmas insights suggest it’s not all doom and gloom on the high street. Certainly brands such as Ted Baker, Joules and Fat Face performed well. These brands share a clear view of who their customer is and focus on driving targeted propositions. In the main, they avoided aggressive discounting; Jigsaw opted to avoid Black Friday and instead look at delighting customers with an innovative collaboration with chocolatier Rococo.

Some of these brands have had to invest in their online position too, closing the gap here.

Young fashion in trouble

It’s really at the younger fashion end of the market where the real trouble lies with New Look well established as the front-runner in a dismal Christmas trading period. CEO Alistair McGeorge is exploring plans to close about 60 of its 600 British stores, as New Look’s like-for-like sales fell by 10.7% in the final quarter of last year.

The media are reporting on vulture funds circling New Look, to capitalise on bond prices plummeting. The collapse had in part been triggered by the fashion brand considering a company voluntary agreement (CVA), with a view to restructure its ailing finances.

New Look’s troubles predate the Christmas period as the retailer has been hit by buying mistakes, over-expansion and competition from rivals like Primark and Zara. This was further compounded by a number of credit insurers declining to cover new shipments by suppliers to its shops. McGeorge is quoted as saying that New Look’s clothes became “too young and edgy” under his predecessor.

Department stores sinking too

New Look joins high street rivals like Debenhams and House of Fraser, which are also battling tough market conditions and ever-increasing competition from online players.

Debenhams, for example, is struggling to find its way out of a cumbersome property estate, keeping stores open it can’t afford to invest in, while tied into leases. At the same time, a confused stable of own brands and lack of online sophistication has left the customer disconnected. House of Fraser too is struggling with its own estate challenges, however it runs the risk of compromising concession partners, who may feel their under-invested stores no longer support their premium needs.

The pressures of rising costs, falling consumer spending and increased competition are set to make the rest of the year challenging for the sector. Innovation and adaptability will be key for those looking to stay afloat.

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The opinions expressed herein are the personal opinion of the author and are not intended as statements of fact and do not represent the view of SnapShop or Pragma in any way.


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