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KN52002

KEY NOTE CLOTHING RETAILING : July 2002

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This report covers: outerwear, underwear, hosiery, denim, jeans, suits, jackets, trousers, coats, pants, vests, lingerie, socks, jumpers, tights, women's wear, pants, bras, teddies, camisoles, swimwear, girls' wear, infants' wear, men's wear, boys' wear, department stores, fashion chains, sports shops, general mail order catalogues, discount shops, charity shops, agency catalogues, direct selling, direct marketing, internet, digital television,franchises, expenditure by dress size, expenditure by type of outlet,

Companies covered include: BhS, Debenhams Retail, House of Fraser, Marks and Spencer, Matalan, Alexon Group, Arcadia group, Austin Reed, Ciro Citterio Menswear, Fasr Retailing, French Connection Retail, H&M Hennes, Laura Ashley Holdings, Monsoon, Moss Bros, New Look, Next, Oasis Stores, River Island Clothing, Ted Baker, Tesco, J Sainsbury, ASDA, Coats Viyella, Dawson International, Dewhirst, Sherwood,

EXECUTIVE SUMMARY

This report examines the highly-competitive UK clothing retailing industry, in which one retailer will gain at the expense of another. During 2000, the discount clothing sector led by Matalan PLC, TK Maxx PLC and Primark PLC, grew by almost 15 percent at the expense of mid-market retailers such as Marks & Spencer PLC (M&S) and Arcadia Group PLC. Inevitably, the latter fought back with their own price cuts and the investment of considerable resources to regain lost ground. It is this middle market that is now making progress, with Bhs Ltd and Arcadia Group PLC, in particular, showing impressive recoveries. The big corporate chains are claiming growing market share with fewer, but bigger, outlets. According to the Department of Trade & Industry (DTI), the largest shops and chains control about 75 percent of the clothing market. The growing involvement of the grocery multiples is certainly adding low-price capacity.

Shoppers have become more price-conscious and while global designer brands are still coveted, the infatuation with them during the 1980s and 1990s has now created a backlash, with consumers turning away from overt displays of wealth and choosing more discreet logos and branding. At the same time, European companies such as Hennes & Mauritz PLC, Zara and Mango are strengthening their hold on foreign markets, including the UK, and introducing mid-market global fashion brands. Meanwhile, Fast Retailing, one of Japan's best-performing retailers, entered the UK market in September 2001 with its Uniqlo stores that sell good-quality items at very low prices.

Retail sales in April 2002 saw the biggest monthly rise in more than 2 years. However, a smaller percentage of disposable income than ever is being spent on clothing, and clothing retailing features a high degree of discounting, curtailing potential growth. Key Note anticipates that retail value for clothing garments is expected to grow by just 3 percent over the next year. In 2001, sales of women's clothing accounted for 54 percent of the total market value of sales, and the women's and girl's clothing sectors are expected to continue benefiting from the best rate of growth.

Manufacturers and retailers are particularly targeting the 'tweenager' market of fashion-conscious 8 to 12 year-olds, and the efforts of Next PLC and ASDA are provoking criticism from parents and children's charities.

Other controversies affecting the sector, include 'grey' market imports, trademark infringement, price-fixing and an alleged exploitation of labour. An impending rise in the minimum wage and a rise in National Insurance contributions may also prove difficult in the highly labour-intensive retailing market.

TABLE OF CONTENTS

1. Market Definition	2
MARKET SECTORS	2
Outerwear	2
Underwear and Hosiery	2
MARKET TRENDS	2
Denim Jeans	2
International Brands	2
Fashion Awareness	3
Market Position	3
The UK	3
Table 1: Household Expenditure on Clothing as a percentage of Total Expenditure on Durable and Non-Durable Goods and Services (£m at rsp and percent), 1997-2001	3
Overseas	4
2. Market Size	5
THE TOTAL MARKET	5
Manufacturers’ Sales	5
Retail Sales	5
Table 2: The UK Clothing Retailing Market by Value at Current Prices (£m at rsp), 1997-2001	5
By MARKET SECTOR	6
Garments	6
Table 3: The UK Clothing Garments Market by Sector by Value at Current Prices (£m at rsp), 1997-2001	6
Women’s Garments	6
Table 4: The UK Women’s Clothing Garments Market by Value at Current Prices (£m at rsp), 2001	7
Dress Size	7
Table 5: Consumer Expenditure on Clothing and Accessories by Dress Size ( percent), 1997, 1999 and 2001	7
Men’s Garments	8
Table 6: The UK Men’s Clothing Retailing Market by Value at Current Prices (£m at rsp), 2001	8
Children’s Garments	8
Table 7:The UK Children’s Clothing Garments Market by Value at Current Prices (£m at rsp), 2001	8
Clothing Accessories	9
Table 8: The UK Clothing Accessories Market by Value at Current Prices (£m at rsp), 2001	9
Overseas Trade	9
3. Industry Background	10
RECENT HISTORY	10
NUMBER OF COMPANIES	10
Table 9: Number of VAT-Based Enterprises Engaged in Clothing Retailing by Turnover Size (£000 and percent), 2001	10
Employment	11
Regional Variations in the Marketplace	11
Distribution	11
Table 10: Share of Expenditure on the Clothing Retailing Market by Type of Outlet ( percent),1997 and 2001	12
HOW ROBUST IS THE MARKET?	13
LEGISLATION	13
The Agreement on Textiles and Clothing	13
Azo-Dyes	13
The Budget, 2002	13
The Minimum Wage	14
VAT	14
KEY TRADE ASSOCIATIONS	14
British Apparel and Textiles Confederation	14
British Menswear Guild Ltd	14
Textile, Clothing & Footwear Unit	14
UK Fashion Exports	14
4. Competitor Analysis
THE MARKETPLACE	15
MARKET LEADERS	15
Alexon Group PLC	15
Austin Reed Group PLC	16
Arcadia Group PLC	16
Bhs Ltd	17
House of Fraser Group PLC	18
Marks & Spencer PLC	19
Matalan PLC	20
Other Companies	21
Ciro Citterio Menswear PLC	21
Fast Retailing (UK) Ltd	22
French Connection Group PLC	22
H&M Hennes Ltd	23
Laura Ashley Holdings PLC	23
Monsoon PLC	24
Table 11: Turnover and Profit of Monsoon PLC (£000), Years Ending 26th May 2000 and 2001	25
Moss Bros. Group PLC	25
New Look Group PLC	26
Next PLC	27
Table 12: Turnover and Pre-Tax Profits of Next Retail and Next Directory (£m), Years Ending 26th January 2001 and 2002	28
Oasis Stores Ltd	28
River Island Clothing Company Ltd	29
Ted Baker PLC	29
Grocery Multiples	30
Tesco PLC	30
J Sainsbury PLC	30
ASDA	31
OUTSIDE SUPPLIERS	31
Coats Viyella PLC	31
Dawson International PLC	31
Dewhirst Group PLC	32
The Sherwood Group PLC	32
ADVERTISING AND PROMOTION32
Introduction	32
Main Media Advertising Expenditure 32
Table 13: Main Media Advertising Expenditure on Clothing Retailing (£000),Year Ending December 2001	33
Men’s, Women’s and Unisex Fashion Retail	33
Table 14: Main Media Advertising Expenditure by Gap (£000), Year Ending December 2001 34
Table 15: Main Media Advertising Expenditure by French Connection (£000), Year Ending December 2001	34
Table 16: Main Media Advertising Expenditure by Ralph Lauren (£000), Year Ending December 2001	35
Table 17: Main Media Advertising Expenditure by H&M Hennes (£000), Year Ending December 2001	35
Women’s Fashion Retail	35
Table 18: Main Media Advertising Expenditure on Women’s Fashion Retail (£000), Year Ending December 2001	36
Men’s Fashion Retail	36
Table 19: Main Media Advertising Expenditure on Men’s Fashion Retail (£000), Year Ending December 2001	36
Designer Fashion Retail	36
Table 20: Main Media Advertising Expenditure on Designer Fashion Retail (£000), Year Ending December 2001	37
Bridalwear Fashion Retail	37
Table 21: Main Media Advertising Expenditure on Designer Bridalwear (£000), Year Ending December 2001	37
Main Media Advertising Expenditure on Clothing by Department Stores	37
Table 22: Main Media Advertising Expenditure on Clothing by Department Stores (£000), Year Ending December 2001	38
RECENT CAMPAIGNS	38
Pringle	38
Levi Strauss	38
Arcadia Group PLC	39
Monsoon PLC	39
Cotton Traders	39
S Club	39
Marks & Spencer PLC	39
Exhibitions	40
5. Strengths, Weaknesses, Opportunities and Threats
STRENGTHS	41
WEAKNESSES	41
Opportunities	42
THREATS	42
6. Buying Behaviour
HOUSEHOLD EXPENDITURE	43
Table 23: Average Weekly Household Expenditure on Clothing and Footwear (£), 1996/1997 to 2000/2001	43
Table 24: Average Weekly Household Expenditure on Clothing and Footwear by Sector (£), 2000/2001	44
Expenditure by Gross Income Decile Group	44


Table 25: Average Weekly Household Expenditure on Clothing and Footwear by Gross Income Decile Group (£), 2000/2001	45
Expenditure by Age	45
Table 26: Average Weekly Household Expenditure on Clothing and Footwear by Age of Head of Household (£), 2000/2001	45
Place of Purchase	46
Purchase By Gender	46
Women’s Clothing	46
Outerwear	46
Table 27: Purchase of Women’s Outerwear by Value in the Last 12 Months ( percent of women), 2001	47
Underwear	47
Table 28: Purchase of Women’s Underwear by Value in the Last 12 Months ( percent of women), 2001	48
Children’s Clothing	48
Table 29: Purchase of Children’s Clothing by Value in the Last 12 Months ( percent of women), 2001	48
Men’s Clothing	48
Outerwear	48
Table 30: Purchase of Men’s Outerwear by Value in the Last 12 Months ( percent of men), 2001	49
Underwear and Ties	49
Table 31: Purchase of Men’s Underwear and Ties by Value in the Last 12 Months ( percent of men), 2001	50

7. Current Issues
MERGERS AND ACQUISITIONS	51
Arcadia Group PLC	51
Blacks Leisure Group PLC	51
Ciro Citterio Menswear PLC	51
JJB Sports PLC	51
Ladybird	51
Liberty PLC	52
Matalan PLC	52
Moss Bros. Group PLC	52
New Look Group PLC	53
Oasis Stores Ltd	53
William Baird PLC	53
Scotch House Ltd	53
Stolen from Ivor	53
cORPORATE ACTIVITY	54
Alexon Group PLC	54
Austin Reed Group PLC	54
Ben Sherman Ltd	54
Bhs Ltd	54
Gap Inc.	54
Fast Retailing (UK) Ltd	55
French Connection Group PLC	55
Hennes & Mauritz PLC	55
Marchpole Holdings PLC	55
Marks & Spencer PLC	55
Matalan PLC	56
Monsoon PLC	56
Moss Bros. Group PLC	56
New Look Group PLC	56
Next PLC	57
The Sherwood Group PLC	57
Ted Baker PLC	57
OTHER CORPORATE DEVELOPMENTS	57
Adams Childrenswear	57
Adidas	57
Argos	57
Benetton	58
Bon Marché	58
Burberry	58
Cromwells Madhouse	58
Diesel Jeans	58
Esprit Ltd	58
Ethel Austin	58
Fat Face	58
Great Clothes	59
Hugo Boss	59
Jacques Vert	59
Jane Norman	59
J Barbour & Sons Ltd	59
Liz Claiborne	59
Mini Man United	59
Mothercare PLC	59
Mulberry	60
Naf Naf	60
National Schoolwear Centres	60
Next PLC	60
Nike	60
Peacock Group PLC	60
Primark	60
Pringle	61
Reebok	61
Stockpile Ltd	61
Talbots	61
Warehouse	61
iNDUSTRY cONCERNS	62
Counterfeiting	62
Price-Fixing	62
The ‘Grey’ Market	62
Cheap Labour	63
8. The Global Market
INTRODUCTION	64
GLOBAL NEWS FROM PRINCIPAL COMPETITORS IN THE CLOTHING MARKET	64
Fast Retailing Ltd	64
Inditex	65
Gap Inc.	65
Gianfranco Ferré	65
Cortefiel	65

9. Forecasts
AN AGEING POPULATION	66
DISCOUNTING	66
Forecasts 2002 to 2006	66
Table 32: The Forecast UK Clothing Retailing Market by Value at Current Prices (£m at rsp), 2002-2006	67
10. Company Profiles
Alexon Group PLC	69
Arcadia Group PLC	71
Austin Reed Group PLC	73
French Connection Group PLC	75
Laura Ashley Holdings PLC	77
Marks and Spencer PLC	79
Matalan PLC	81
Moss Bros. Group PLC	83
11. Further Sources
Associations	85
Publications	86
Directories	87
General Sources	88
Bonnier Information Sources	89
Government Publications	90
Other Sources	91
Understanding TGI Data	93
Number, Profile, Penetration	93
Social Grade	94
Standard Region	94
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