Marks & Spencer `will fare better that rivals in downturn'

MARKS & SPENCER, the troubled retailer, has been singled out as being among a small handful of clothing retailers who will benefit from a forthcoming downturn in the fashion industry. The slump is expected to put severe pressure on almost all businesses in the clothing sector.

According to a report by Verdict, the retail consultancy, clothing retailers will suffer weak consumer demand, low inflation, and rising costs in the next five years. Footwear retailers will fare worst, with some 600 shoe shops likely to close.

"This is not part of a cyclical pattern. This is the shape of things to come, and retail companies need to quickly get used to life in a low growth environment," said a Verdict spokesman.

The consultancy warns that the clothing and footwear industry is set to add over 10m square feet of retail space, equivalent to 6 Lakeside or Meadowhall shopping centres, against a backdrop of near-static like- for-like forecast volume growth.

Sales growth will reach a peak of just 2 per cent in 2002. Even so, sales per square foot in 2002 will be no greater than their level in 1997. Footwear will suffer negative growth in the period.

However, Verdict is full of praise for M&S, which it says will triumph over its rivals as margins crumble across the industry despite its massive recent setbacks. There were fresh reports at the weekend that its sales had fallen further.

The report predicts the company will pull through triumphantly, however.

"Marks & Spencer is changing further and faster than can yet be seen in the stores. It is rapidly embracing a culture that is genuinely putting customers at the top of the agenda and a management style that allows all its previous thinking to be challenged."

The report argues M&S will make dramatic gains in market share through a combination of lower prices and increased quality. In a flat market, other retailers will suffer as a direct consequence of M&S's strength. The report also singles out Next, Debenhams and Matalan as stronger performers because general retailers are likely to perform best.

Verdict says the current year will see the slowest growth in retail sales this decade. The situation would be worse still were it not for an expected benefit from the millennium.