Posh Spice's dress boosts M&S

Posh Spice's shopping trip to a Marks & Spencer Group Plc store may help the United Kingdom's largest clothing retailer outperform British discount chains.

Posh, the pop singer whose real name is Victoria Beckham (right), created a run on a 149-pound leather dress after buying one this fall at Marks & Spencer, which is adding pricier items even as energy costs rise and consumer confidence drops.

The strategy by Marks & Spencer and competitor Next Plc may reverse this year's declines in both companies' shares, estimates compiled by Bloomberg show. Marks & Spencer will advance 28 percent in the next 12 months, according to the estimates. Leicester, England-based Next Plc will rise 37 percent. Associated British Foods Plc, up 13 percent since September 21, will gain 5.9 percent.

"Harder times can sometimes make people think about quality and durability," said Ian MacDougall, an analyst at Blue Oar Securities in London. "Next has chosen to address this by actually trading up a bit, which sounds the wrong thing to do but it may actually work." He has a "buy" rating on the shares.

The efforts by M&S and Next could end a decade of market growth leadership by discounters including London-based Associated British's Primark and Wal-Mart Stores Inc's Asda Group Ltd.

Shoppers are choosing items like a 70-pound dress from Next's new Signature line instead of several pairs of inexpensive jeans at Primark, according to retail analysts. The addition of luxury products may help boost profit and sales at both chains as they attempt to raise their share of the 34.8 billion-pound UK clothing market, said Andrew Wade, an analyst at Seymour Pierce in London.

Rising profit

Next's pretax profit will advance 13 percent to 542 million pounds in the three years through January 2010, analysts at UBS in London estimate. Citigroup expects London-based Marks & Spencer to achieve pretax profit of 1.3 billion pounds in 2010, up 34 percent from the current fiscal year.

Of the 24 analysts polled by Bloomberg, 16 rate Marks & Spencer a buy, five say "hold" and three advise selling. Among 27 analysts who follow Next, 17 regard it as a buy, five a hold, and three a sell.

In the United States, many retailers are discounting in order to lure shoppers this holiday season. US retail sales dropped for the second straight week in the seven days through December 8, according to ShopperTrak RCT Corp.

The number of shoppers entering UK stores fell 1.5 percent in the week through December 8, from a year earlier, market research company Synovate said. Retail stocks fell to their lowest since February 2004 in London trading yesterday on concern that holiday sales will be below analysts' estimates.

UK consumer confidence declined the most in at least three years in November as rising mortgage payments, utility bills and food prices weighed on disposable incomes.

The gloomy outlook hasn't stopped Caroline Fleck. The personal assistant is shopping for a party dress that will get her through more than one season of Christmas cocktails.

"If I want to buy something nice that really lasts, I'll go a bit more upmarket," said Fleck, 29, while shopping on London's Oxford Street. Fleck said she would spend as much as 200 pounds on a dress, twice as much as last year.

Same-store sales at Next have been dropping for more than two years and Next shares have declined 11 percent this year. Marks & Spencer's stock has dropped 24 percent amid concern of a consumer slowdown. The company's sales will rise about 25 percent in the next three years, analyst estimates compiled by Bloomberg show.

Beckham's dress

Both Marks & Spencer and Next began offering exclusive dresses and clothing to cash in on a trend toward luxury products, according to market research company Verdict. Marks & Spencer is selling a fur-tipped sheepskin coat for 699 pounds as part of its new Autograph Exclusives line.

The star power of Beckham, a member of the Spice Girls and the wife of soccer player David Beckham, is helping convince shoppers. After she bought the leather dress from Marks & Spencer's Limited Collection, the company's flagship store at Marble Arch sold out in four days, company spokeswoman Clare Wilkes said. A spokeswoman for Beckham declined to comment.

"Consumers are looking for exclusivity and brands with a strong identity that set them apart from competitors," says Verdict analyst Maureen Hinton in London. "M&S is benefiting from it, and in a way is inspiring it."

Lines such as Marks & Spencer's Autograph Exclusives, sold at the company's top five stores, will attract a cash-conscious consumer, Marks & Spencer Chief Executive Stuart Rose said.

"You would rather buy something that lasts longer if your purse is tighter," Rose said on a November 6 conference call. "The customer is much cannier than we give them credit for."

This fall, Next introduced a higher-priced range of clothing made with better fabrics, such as a 100-pound sequin "prom" dress. The line will contribute to a 6.2 percent rise in the average selling price this autumn/winter, compared with a 3.1 percent decline last year, Next said in September.

Bloomberg News

(China Daily 12/19/2007 page16)