Investors are concerned that with eight weeks of the key sales season already gone, retailers have already run out of time to sell their remaining stock before Christmas.
“Retailers have suffered from a lack lustre start to winter trading this year, as temperatures have remained stubbornly high. With the hottest Halloween for 160 years now forecast for some parts of England, retailers risk being left with a ticking time bomb as they struggle to sell their winter stock in the remaining weeks before Christmas. Despite a slight uptick in sales seen in mid October, many are already restating their sales forecasts for this quarter,” said Chris Laverty, Restructuring partner at KPMG.
“In order to prevent this potential stock overhang, some retailers will be forced to launch earlier and deeper discounts to sell these goods and reduce the risk of being left with a mountain of winter woollies and boots at Christmas."
“But discounting has a domino effect.By launching a sale for just one category retailers will further shoppers’ belief that other discounts will inevitably follow if they delay their spending. This leads retailers to bring forward their wider Christmas promotions campaigns and they end up discounting items that they could have sold at full price."
“This has an impact on the entire supply chain and the overall availability of popular items: promotions programmes are carefully mapped to optimise stock availability across the key shopping days to Christmas, with limited or no ability to replenish strong selling lines."
“It’s inevitable that some retailers will see their profits fall this Christmas as a consequence of heavily discounting excess winter stock, resulting in the potential need to increase working capital to fund spring/summer orders.”
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Zoe Sheppard, PR Manager at KPMG:
T: +44 (0)11 7905 4337
KPMG Press Office: +44 (0) 207 694 8773
KPMG LLP, a UK limited liability partnership, operates from 22 offices across the UK with approximately 11,500 partners and staff. The UK firm recorded a turnover of £1.8 billion in the year ended September 2013. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. It operates in 155 countries and has 155,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such.
This article represents the views of the author only, and does not necessarily represent the views or professional advice of KPMG in the UK.