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Moody's paints gloomy picture for M&S and Next
Apr '16
UK non-food textile retailers, such as Marks & Spencer plc (Baa3 stable) and Next plc (Baa2 stable), could face slower profit growth in 2016-17, reflecting the recent trend of consumers spending more on entertainment, holidays and new cars rather than on clothing and footwear, says credit rating agency Moody's.

Moody's has become the latest voice to join warnings about the health of the UK fashion retail sector.

The country's retailers have been struggling in an increasingly competitive environment as a result of the growth of online-only rivals, unseasonal weather and a shift in consumer spending.

Despite consumer confidence increasing, spending on clothing and footwear has been declining since the middle of 2014 and is being outpaced by consumers treating themselves to evenings out and holidays.

As a result Moody's forecasts clothing sales at Marks & Spencer and Next will suffer from slower profits growth in the next year and a half.

“Whilst it is still early days and there is possibly some upside to the guidance, the environment has become less supportive for non-food textile retailers, which is likely to affect profit growth in 2016 to 2017,” said Ernesto Bisagno, senior analyst at Moody's.

Next's chief executive Lord Wolfson warned last month that the high street bellwether was facing its “toughest year” since the financial crisis.

Meanwhile, figures from the British Retail Consortium confirmed the dire state of the high street with clothing and footwear retail sales in March falling to the lowest level in two years, despite a number of mid-season promotions.

Overall retail sales were flat in March while they grew by 1.4 per cent over the last three months, according to figures by the BRC.

“Looking at the long-term picture, the rolling 12-month average growth slowed to 1.4 per cent, its lowest since August 2015,” said Helen Dickinson, chief executive of BRC. (SH)

Fibre2Fashion News Desk – India

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