They had to pick a sacrificial lamb; whether to forfeit sales or profits? Like-for-likes at the expense of margins? They fell into two camps: those that promoted aggressively before Christmas and those that stood firm.
Today, New Look revealed its strategy had been to batten down the hatches on profits and wait for the inevitable storm around sales to pass. The result? A 3.4 per cent slump in like-for-like sales in the 15 weeks to January 5, but a gross margin increase of more than 400 basis points and a like-for-like gross profit uplift of 4.2 per cent.
And, while New Look chief executive Phil Wrigley’s warning that he expects the consumer environment to remain challenging in 2008 may not tell us anything we did not know already, not everyone will be so bullish about full-year profit growth.
What is clear is that those retailers that have managed stock levels tightly – whatever their level of discounting – and can enter the spring season clean, will be breathing a sigh of relief this new year.
If New Look’s strategy is proven right, then it will have protected profits for when the good times return. And if the option of a sale of the business should rear its head again, the retailer will be in good shape.
With former interested bidder and Landmark chief Micky Jagtiani sniffing around the UK fashion market, New Look would be wise to get bidders’ attention again, after they baulked at the£1.8 billion asking price last summer.
And spare a thought for a downcast Debenhams – which is also on Jagtiani’s radar – when it updates the City next week.
The list of successes in the department store sector is long. Liberty today reported a like-for-like increase of 5 per cent in the four weeks to Christmas Eve, Fortnum & Mason and John Lewis had a record Christmas and Selfridges and House of Fraser’s like-for-like sales were up 9 per cent and 2.4 per cent respectively in the run-up to Christmas.
Which only leaves Debenhams, whose shares slumped 11 per cent yesterday after Marks & Spencer’s miserable Christmas performance.
It seems likely that Debenhams boss Rob Templeman will be forced to go on a similar PR offensive – or should that be defensive – to Sir Stuart Rose’s this week.
Whether Templeman will go as far as to buy£1 million in Debenhams shares, in a sign of his faith in the business, remains to be seen.
No comments yet