Retail: Stores Cut Clothing Prices in Christmas Countdown



Retailers cut prices to boost profits

Retailers cut prices to boost profits

Stores have been left with no choice but to cut the prices on winter clothing due to unseasonably warm weather.

Sir Philip Green, billionaire owner of the Arcadia conglomerate that owns Topshop to Bhs, predicts that the run-up to Christmas will be good times for consumers as store groups try to move winter stock that has been stagnant on shelves.

Hottest in history

This fall has been the hottest recorded October and November in history, leaving firms scrambling to make up revenue amid declining consumer demand for winter goods.

In fact, this week was an average of 12 degrees warmer in London than it was one year before. This means that the most lucrative goods for retailers, including knitwear, boots, and winter coats, have been passed by on store racks and left large inventories that stores will struggle to sell before the spring.

While October, November, and December typically are profitable months with winter wear at full price,  large retail chains such as Debenhams and Marks & Spencer have been offering heavy discounts as much as 40%.

Green predicts that this trend will continue until Christmas. “How can it and why should it? Everybody’s trying to get out their goods,” said Green.

He said this as his firm Arcadia released their year to end-August figures, which showed a fall in profits of 38%.

Consumer attitudes

Though inflation is set to fall in 2012, analysts predict that the UK consumer’s attitude towards spending will not change. With many enduring unemployment or pay freezes, retailers are set for more hits to profits ahead as Britons learn to live on constrained budgets by necessity.

Analysts say that the current financial climate has made consumers more financially aware than they have been in the past, as squeezed budgets force customers to take a hard look at their spending.

While retail outlets have struggled, a new culture of “staying in” has made competition among grocers and home entertainment providers grow fierce. Home entertainment, such as cable television, and food consumption are two of the only retail sectors who have not been hard hit as British pockets have gotten lighter.

Green, who was knighted in 2006, said that retailers who want to stay relevant amid in a stark landscape need to be flexible and think outside the box to attract customers who are watching every pound.

 

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