We have now seen 12 trading weeks in 2017 and business is every bit as tough as expected. The ONS data needs to be treated with huge caution, if not ignored altogether. The picture it paints is fiction, not recognised by any leadership team I talk to. Demand remains soft and consumer confidence brittle. Inflation in living costs is ticking up and earnings remain static. Last year’s falling petrol prices are reversing and the spending boost from PPI is diminishing.
Meanwhile, the industry itself is showing the strain. Distress of various forms at Blue Inc, Brantano, Jones the Bootmaker and Store Twenty One are just the beginning. There is a whiff of panic in the air. When high fixed cost business like retail feel the pressure, leadership teams usually reach out for one of two reduction levers – jobs and prices. We have already seen behemoths like John Lewis, Tesco, Sainsbury’s and Boots reducing headcount – there will be more. Price promotions are now picking up and will continue to rise as we approach Easter.
Our Promotional Tracker shows fashion as the key area for increased discounting week 12, following last year’s pattern but more steeply. 62% of fashion retailers are running mid-season fashion sales versus 59% a year ago. Trading pressure impacts right across the various sectors and the biggest increase in activity has been recorded among premium fashion businesses.
With price cutting up YOY, I see little or no evidence of bought-in price increases being passed on to customers. Our data continues shows price moving in the opposite direction, suggesting the market will simply not bear that scale of price increase.
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