Fashion and Luxury Brands

Fashion, luxury and lifestyle news aggregator - May 2020

Posted: 03/06/2020

On 10 May 2020, almost two months after the  nationwide lockdown began, the Government announced its phased approach to ‘unlocking the economy’. Crucially, all non-essential retail stores have the green light to reopen from 15 June 2020 - news that could not have come soon enough for the industry.

Overall, retail sales were down 18.1% in April, with clothing dropping 50.2%. By contrast, however, online retail sales were up by 23.8% year-on-year for the same period.

While the reopening of stores is widely welcomed, it does present several challenges. One of the most notable obstacles is the enforcement of social distancing measures. There are concerns as to whether shoppers can be relied on to wait patiently in the expected lengthy queues and particularly over fitting rooms and quarantining returns.

Data collected by CACI indicates that the top factors influencing customer behaviour in respect of their future shopping decisions include whether they feel safe in store, and how retailers treat their employees.

Government guidance suggests stores should close their fitting rooms, unless it is essential such as for NHS workers trying on PPE. Stores should also implement a no-contact returns procedure with a designated area, where possible. Returned stock should then be quarantined for 72 hours. More generally, retailers are encouraged to review store layouts, accelerate cleaning schedules, limit customer entry to stores, introduce hand-sanitising stations and discourage any unnecessary touching of stock.

Checkpoint Systems, a global leader in source-to-shopper solutions, has launched two new technologies to help retailers cope with reopening under Covid-19 pressures. The first is a SmartTemperature to measure body temperature and the second software called Inventory Quarantine to handle and manage returns.

How are retailers responding?

Kurt Geiger confirmed its plans for reopening stores. Shoppers will be required to wear disposable pop-socks and use antibacterial gel before trying on shoes. Only card payments will be accepted. The company expects the additional operating cost will be £75,000 per store in 2020.

Many stores are electing to reopen on a gradual basis. Next, is planning to open only 25 out of its 200 stores on 15 June, all of which are found in out-of-town locations. John Lewis & Partners also plans to open just two of its 50 stores on day one. It is thought that this approach will allow retailers to ‘gauge the consumer demand and to test their safety procedures … as retailers find out which measures work and are adhered to by customers’.

Across Europe, countries have adopted different timescales and approaches to re-opening the high street. Germany, on 27 April, allowed stores of up to 8,600 square feet to open, but lifted all restrictions by 6 May. France reopened with strict social distancing rules on 11 May, and Italy reopened on 18 May as part of a ‘calculated risk’ to put the country back on its feet. In the Republic of Ireland, the re-opening date is set for 29 June.

M&S has announced a £1 billion plan to recover from a 37% fall in clothing and home operating profits for the year to 28 March 2020. Profits fell 21% year on year to £403 million. The retailer’s battle plan includes £500 million of cost savings, as it forecasts that Covid-19 will continue to impact sales throughout 2020. This month, the retailer has also announced it will add complementary third-party clothing and home brands to its offering.

US department store Macy’s plans to raise $1.1 billion (£900 million) in a bond offering to help it weather the pandemic. The senior notes will mature in 2025 and be secured by 35 stores and 10 distribution centres.

The latest Government support measures

The key Government announcements in May regarding support measures were:

  • the Bounce Back Loan Scheme (BBLS) – offering easy access loans of up to £50,000 to small businesses – officially opened on 4 May. Figures show that businesses have borrowed £18 billion under the scheme in the first three weeks. However, UK banks estimate that nearly half of the borrowers will default on the debt;
  • the introduction of the £50 million Reopening High Street Safely Fund to support local English councils in their efforts to help reopen the high street. The fund will assist councils in introducing signs, markings and temporary barriers, as well as on associated marketing campaigns;
  • on 12 May, the Chancellor extended the furlough scheme until the end of October 2020, with workers to continue receiving 80% of their current salary (up to £2,500). Mr Sunak confirmed the details of a gradual phasing out of the scheme, as follows:
    • furloughed workers can be brought back part-time in July for increased flexibility;
    • employers will start making initial contributions to the scheme from 1 August. From that date, they will be responsible for payment of the employer national insurance and pension contributions. For the average business, this amounts to 5% of employment costs;
    • by October, the Government will pay 60% of wages, up to £1,875. Employers will be expected to pay 20%;
    • the scheme will stop and will not be extended beyond October; and
  • the self-employment income support scheme will be rolled over for another three-month period. This scheme was introduced to cover lost trading profits of up to £2,500 a month for three months. Those eligible will be able to claim a second and final grant in August, capped at £6,750 in total.

The British Retail Consortium (BRC) has written to the Economic Secretary, John Glen, to ask ministers to find a way around EU state aid rules that may prevent Government support going to lossmaking companies. The state aid rules prohibit this support for “undertakings in difficulty” with significant debt on their balance sheets, and high growth businesses that spend heavily on expansion and which record pre-tax losses.

Other news

Gucci will now only hold fashion shows twice a year, which will be “seasonless”. This comes after the British Fashion Council and the Council of Fashion Designers of America called for the industry to “slow down”.

The Government announced the new UK Global Tariff regime to be applied to imports into the UK from 1 January 2021. For the fashion and textile sector, 67% of the 1,200 tariff lines will remain unchanged. Import duty on most fashion lines will stay at 12%, while yarns and fabrics will be between 4% and 8%.

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