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Two weeks in retail - 25th September

Four years ago saw the collapse of Lehmans Bank – the financial crisis that marked the start of the recession.

Figures released by the British Retail Consortium last week to coincide with the anniversary, showed just how devastating an effect the bank’s collapse had on the retail market with year on year growth in the total value of retail sales averaging only 2.1% over the past two years – a figure markedly below inflation.

It marked calls from the BRC to scrap a fuel duty increase – currently planned for January – and the costs - - such as business rates – that retailers face.

British Retail Consortium director general Stephen Robertson said: “Four years on from this key event in the banking crisis, which sent retail sales plummeting, sales growth is still less than half what it was before. Sales volumes are now going backwards.”

The retail body also questioned the Office for Nationals Statistics’ analysis of August sales which the ONS said was 3.4% up. The BRC’s own Retail Sales Monitor – published two weeks previously – had identified August at the worst performing month of the year.

The BRC said that the ONS’ figures for online spending supported its own research however, that whilst the Olympics produced a feel good factor amongst customers that didn’t necessarily translate into spend.

Certainly the market continues to suffer, particularly within the clothing and fashion industry which has been hardest hit by the collapse in consumer confidence and the unpredictable and wet weather of the summer. Sports giant JJB Sports became one of the latest victims as it entered administration this week.

Profits were hit at fellow sports retailer JD Sports which despite revealing a small increase in like for likes for the first half saw profits hit by a £10 million loss at Blacks – the outdoor business it acquired earlier this year from administration. The loss was due to ‘lack of stock and an unsustainable cost base’. However it said the business was now stabilising.

Meanwhile French Connection revealed it was loss making for the six months to July 31. The retailer made a pre-tax loss of £6.3 million for the period compared to £700,000 last year on sales down from £102.8 million to £96 million. The retailer has been undertaking a strategic review of the business and unveiled a range of measures it hopes will return the group to profit – including better customer service and more competitive pricing, an improved buying process and the disposal of loss making stores. It said it didn’t expect any improvement in the UK retail trading environment within the second half.

At fashion retailer Moss Bros the menswear retailer reported like for likes up and a stabilisation of profits as it revealed a pre-tax profit of £2.2m in the first half to July 28, slightly up from £2.16 million last year. However the retailer said the Olympics had had an effect with a slowdown in like for like sales in the seven weeks to September 15. Margins were hit by the retailer absorbing an increase in raw material costs.

It was a similar story at fellow fashion group River Island whose latest results showed a profits fall of a quarter to £86.9 million, caused by the retailer absorbing rather than passing on the increased costs of operating. Sales were £799.1m in the year to December 25, 2011. The retailer also increased staffing by boosting full time employee numbers by 10% during the period.

There is also discontent at fashion retailer SuperGroup – operators of the Superdry brand – after one in five of the company’s shareholders voiced their objections at management and their pay at the company’s annual meeting, held last week. The shareholders are said to be unhappy at recent problems and profit warnings at the group.

However other retailers are targeting ambitious growth despite the problems of the retail sector.

Kiddicare, which was acquired by grocery giant Morrisons in February last year has targeted an ambitious £200 million of sales – an increase of £150 million – by 2016 as it begins a new store opening programme this week. 

The retailer bought 10 Best Buy stores in January and will open the first of the stores in Nottingham this week – proving a direct challenge to existing but struggling maternity and baby goods retailers such as Mothercare. The retailer is also relaunching its website next month and increasing its focus on toys and clothing.

With Christmas stock now fast filling retailers’ shelves it really is all to play for.

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