(Source: Datamonitor)For the clothing & footwear sector, 2008 has already been a difficult year, with high profile retailers such as mkone, Stead & Simpson and Dolcis going into administration. Moreover, with media coverage of the world's economic woes further compounding consumer concerns, the outlook continues to be tough. As a result, retailers in this sector will have to work harder to convince consumers to spend.

The latest results from Marks & Spencer have done nothing to relieve anxieties regarding the UK clothing & footwear sector, with the industry bellwether reporting a 3.5% fall in UK clothing sales over the 13 weeks to September 27, 2008, following a similar deterioration in the retailer's first quarter. Meanwhile, Next, the second largest clothing retailer in the country behind M&S, reported a 6.0% fall in full price sales in its Retail division and a 1.7% fall in total Brand sales for the six months to July 2008.

While the declines at these high profile names have fueled concerns, not all of the news coming out of the clothing & footwear sector has been negative. Ted Baker, for example, has seen UK and Europe sales outperform its space growth, with densities rising 2.2% to GBP312 per square foot and total sales up 18.5% to GBP48.1 million. Nevertheless, the underlying message for the sector as a whole is clearly one of caution.

Although trading down activity has been evident in the food sector, with consumers turning to lower priced goods and retailers, the message from the clothing sector has been less clear. Primark - the UK's leading specialist value clothing retailer - saw like-for-like sales growth of just 2.0% in the six months to September, although, with space up 8.0% for the year, this is still a highly respectable performance.

Nevertheless, few of the value retailers have benefited significantly from the steadily deteriorating economic conditions of the last year. Indeed, several have entered administration during 2008, including Select Retail, Ethel Austin, mkone and Internacionale parent Ossian Retail among the larger examples. Meanwhile, Asda announced plans to close its standalone George stores, which were unable to attract sufficient footfall by their own merit to justify the expense of operating high street stores.

Rather than seeing a trend towards purely lower cost clothing, the movement has been more clearly towards consumers achieving better value for money. As well as Primark, this trend has benefited branded clothing discounters such as TK Maxx and The Original Factory Shop, as well as those conventional clothing retailers such as John Lewis or Burberry that can best justify their prices - for example through higher quality design and detail, generating excitement with the shopping experience, or service and convenience.

Changes in the structure of the clothing market are evident, with growth patterns moving towards those traditionally associated with times of tight consumer spending. Childrenswear is holding up the best for two core reasons. Firstly, parents typically prefer to cut back on spending in other areas before reducing spend on their children, and, with children's growth spurts, a higher proportion of purchases are essential rather than indulgent. For 2008, Verdict expects UK childrenswear sales to grow by 3.0%, in line with 2007, although also expects growth to slip back slightly next year.

In contrast, menswear is proving a far more challenging market segment, with men generally more willing to cut back on discretionary spending in this area than women when they feel financial pressures. Growth rates in this category have lagged behind 2007 this year, and Verdict expects full-year growth of just 2.1% - a 1.2 percentage point drop on 2007.

Footwear is also proving particularly difficult. Following a very strong performance in 2007 - buoyed by increased availability and exposure as clothing retailers expanded their footwear offers - retailers started the year faced with tough comparatives and overcapacity in the market. Several key footwear retailers have since been forced into administration, including Dolcis, Stead & Simpson and most recently Faith.

The rest of 2008 and 2009 will be tough for clothing & footwear retailers, but not disastrous. Stronger fashion trends and bold colors should aid Autumn/Winter sales - particularly in outerwear - but retailers will need to work harder to convince people to spend, and increasingly savvy consumers will be demanding more value for their money.

Source: Verdict Research