By Sarah Shannon
Nov. 26 (Bloomberg) -- A year after swaths of panic price cuts led to a Christmas “Armageddon” for U.K. retailers, Britons may find it harder to get a bargain before the holiday.
Marks & Spencer Group Plc, New Look Group Ltd. and House of Fraser Ltd. are among stores that say they don’t plan full-scale discounting before Dec. 25. With consumer optimism holding at an 18-month high, shoppers may still spend more in December than a year ago, according to researcher Mintel International.
“I can’t see last year’s level of disorder on the high street,” New Look Finance Director Alistair Miller said in an interview with Bloomberg News. Going on sale before the holiday “is an absolutely suicidal move for retailers.”
Ninety of Britain’s 100 biggest store owners started discounting before Christmas last year as the financial crisis that followed the collapse of Lehman Brothers Holdings Inc. caused consumers to slash their holiday budgets. In London’s main shopping district, only 40 percent of retailers are planning pre-holiday discount days this year, according to the New West End Company, the organization which represents them.
“There’s much less blanket discounts this year,” said Richard Dickinson, the organization’s chief executive officer. “Stores have been much more astute about ordering. What people are doing is much more event driven and promotion driven.”
No ‘Armageddon’
Numis Securities analyst Andy Wade expects Christmas to be “a lot stronger” for profitability as discounting subsides. Marks & Spencer’s gross margin narrowed by 1.7 percentage points in its last fiscal year after the retailer held two “Christmas Spectaculars,” one-day events in which the price of almost all products was cut by 20 percent. Those won’t be repeated this year, according to Executive Chairman Stuart Rose, who said this month that the “Armageddon” scenario of 2008 has now passed.
M&S, the U.K.’s largest clothing retailer, will “trade full price through Christmas,” Rose said. Instead of price cuts, the London-based company will rely on 1,000 new products such as a 45-pound ($75.2) Christmas dinner for four people, and a 10 million-pound advertisement campaign featuring stars from the Absolutely Fabulous television series.
House of Fraser Plc, the U.K.’s third-largest department- store chain, will only run “targeted promotions” such as 25 pounds off party-wear in the run up to Christmas, spokeswoman Clotilde Gros said. Last year, the retailer offered price cuts of as much as 50 percent before the holiday.
New Look, the owner of 610 budget fashion outlets, will run promotions on party dresses later in the holiday season and start discounting by as much as 70 percent from Dec. 26, Miller said.
‘Cut Their Cloth’
“Compared to the build up to 2008’s doom and gloom laden Christmas period, 2009 is looking much more positive,” said Jon Wright, retailing manager at market researcher Euromonitor. “Retailers have cut their cloth accordingly in terms of inventory, staffing, merchandising activities and promotion.”
Mintel forecasts that December retail sales will rise by 2 percent after declining 1.7 percent in the same month last year. The lowest interest rates on record and improving house prices have buoyed Britons willingness to spend, according to Richard Hyman, strategic retail adviser to Deloitte & Touche LLP.
“I certainly feel more confident about the economy,” said Joanne Burrows, 61, as she shopped for gifts on London’s Oxford Street. “My husband and I are feeling a bit more certain about our savings and house prices seem to have recovered a little. I’d say I’m spending more than last year.”
To date, few town center retailers have followed the lead of department-store chain Debenhams Plc, which started a 250 million-pound price cutting campaign on Nov. 18, surpassing its 200 million pounds of discounts before Christmas last year.
‘More Profitable’
John Lewis Partnership Plc, the biggest U.K. department store owner, will start its clearance on Dec. 26 at its Trafford outlet in northwest England, spokeswoman Laura Chilvers said. All other John Lewis shops will go on sale from Dec. 27.
“Christmas 2009 will be more profitable than last year thanks to a more benign competitive environment,” said Kate Calvert, an analyst at Shore Capital. Price cutting in December last year was exacerbated by closing down sales at 815 Woolworths Group Plc stores across the U.K.
Not everyone agrees that the holiday will see growth in U.K. retail sales. Verdict Research forecasts a 0.7 percent drop.
Deloitte’s Hyman expects Christmas sales to be a “whisper” up on last year, only to fall by 1.5 percent in 2010 because of a planned increase in value-added tax in January and potential rises in interest rates and unemployment.
“It’s extraordinary that retail has held up as well as it has given the recession, and it really is a testament to how wedded to spending the U.K. consumer is,” Hyman said. “You could say they are in denial.”
On Oxford Street, 37-year-old Caroline Chambers said she can afford to spend more on gifts than she did last year.
“My husband feels more secure in his job and that’s made a big difference to how we feel about spending,” Chambers said. “I’m not that worried about next year. Things are improving.”
To contact the reporter on this story: Sarah Shannon in London at sshannon4@bloomberg.net.
Posts
No comments:
Post a Comment