Outlook is tough, but it’s not all gloom say retailers

RETAILERS will face an uphill battle in the next few years as VAT and wage hikes bite, but falling rents, online growth and cautious international expansion, can help them overcome these and other challenges.

That was the view of three leading retailers at an event organised by business advisers Deloitte in Manchester last night.

Panellists Peter Cowgill, executive chairman of Bury-based JD Sports Fashion, Martyn Wates, chief financial officer of the Co-operative Group and Peter Williams, the former Selfridges boss who is now on the board of fast-growing Internet fashion retailer ASOS, all agreed that trading was not going to be helped by public sector cuts and that consumers are nervous.

Martyn Wates said an obsession with negativity in the national media was a threat in itself, and risked making a difficult situation worse still.

He said: “We’ve nothing to fear but fear itself – trading is challenging, like-for-likes are pretty tough and the consumer is nervous.

“Despite this if you stand back and look at it, interest rates have never been lower in 300 years, taxes are lower – 20 years ago the top rate was 60%, the basic rate was 29% so taxes now are relatively low, and GDP growth is recovering.

“We have to be careful by not talking everything down there’s too much doom and gloom out there,”

Mr Cowgill said January’s VAT increase to 20% would hit JD’s profits by around £15m and a wage increase to improve the quality of staff would cost another £5m.

Cuts to benefits, rising unemployment and soaring cotton prices will also pose tough challenges he said,

JD, which is already trading in France after acquiring a fashion footwear business Chausport, is now looking at expanding into Germany and Spain, he said.

In order to de-risk such a move he said the business was looking to partner with existing retailers in these locations.

“We look for someone who is successful in their own right, but who is perhaps lacking the urban offering JD has. We feel this is quite low risk because the existing proposition will be successful and well managed with a distribution infrastructure and local knowledge.”

With regard to retail landlords in this country, Mr Cowgill said the boot is now ‘on the other foot’ and that his business was benefiting from a softer stance on pricing, particularly as rent reviews approach.

“It’s a real opportunity that potentially counteracts some of the negativity.” he said.

All agreed that the Internet offers huge challenges and opportunities,but was not a panacea for all the difficulties on the high street..

Mr Wates said; “As a convenience retailer we’re there for a customer on a Saturday when his friends come round and he runs out of beer – the Internet’s not going to help then.”

Mr Williams said online fashion retailers like ASOS were seeing excellent international growth because “by definition there are no boundaries on the Internet.”

He warned though that in a fast-paced medium, there is always a need to invest in the look and functionality of the website.

“For us it’s about content, community – using social networks like Twitter and Facebook – and communication.”

Deloitte partner Sharon Fraser, who specialises in retail, told the audience of 165 , that the general feeling among North West companies  was that the market is challenging, but there are opportunities.

Having polled a number of leading retailers and suppliers including Matalan, Original Factory Shop, Lakeland, Shop Direct, Topps Tiles, Bench and PZ Cussons, she said: “The feeling is one of caution – Christmas will come, but it will be later and discounting will start earlier. Sales will start earlier and last longer.”