Worse to come for clothing retailers

The tough trading environment for by middle-market retailers is due to get progressively worse over the next five years as competition from grocers and discounters intensifies, a study forecasts today.

The tough trading environment for by middle-market retailers is due to get progressively worse over the next five years as competition from grocers and discounters intensifies, a study forecasts today.

Verdict, the retail consultancy, says moves by Asda, Tesco and Sainsbury's to develop their non-food offering will see the value of clothing sales out of grocers from jump from £1.4bn in 1999 to £2.6bn by 2005. At the same time, discounters such as Matalan and Primark will continue to advance, with sales forecast to rise from £1.9bn to £3.5bn in the period.

Much of the increase in sales will come from retailers with strong brands, such as Gap and Hennes & Mauritz, occupying space vacated by C&A, which is pulling out of UK retailing. Verdict estimates that these retailers will contribute an additional £350m annually to spending on clothing.

"People have plenty of money but prefer to spend it on home-related products," the report says. "There will be more casualties among those who lack brand differentiation. Anyone anticipating brighter horizons over the next five years will be greatly disappointed, as it will be the most difficult trading climate for decades."

Verdict estimates that by 2005, sales growth among specialist retailers will have fallen to just 2 per cent, from 5 per cent during the mid 1990s.

The study estimates that discount retailers' share of the clothing and footwear market will grow from 6 to 10.3 per cent, with the grocers taking 7.5 per cent by 2005, against 4.4 per cent this year. Middle-market retailers, such as Marks & Spencer, Bhs, Littlewoods and Arcadia, are cutting prices by 10 to 20 per cent this year.