Britain's retailers soften prices in struggle to bolster profits

There's trouble inside London's High Street retail stores. And the customers know all about it. They have been finding out through off-season price-slashing sales that most stores are continuing to use to keep up volume, reduce inventories, and to aim at a profitable 1980.

It all started in the fall of 1979. Marks & Spencer, Britain's quality retailer since 1880, came out with a wide range of price reductions -- said to total some $25 million (US) -- at an unusual time for such a sale. The fall season normally calls for new family apparel -- in style, color, and quality -- at more or less regular prices. But the M&S cuts were deep and ranged across varied mercantile lines. Analysts looking later at 1979 profits said it didn't help -- that M&S figures showed the company barely kept ahead of inflationary costs. And what little good profit news M&S reported came from the company's food business.

Other merchants (who claim they can stroll through any retail department and estimate its daily sales, total inventory, payroll cost ratios, and customer response) said M&S had tried to trade up -- too far and too late, all at a time when customers were turning more and more toward less expensive goods. Competiton like Littlewoods, Woolworth, and British Home Stores had kept many price lines lower than M&S, and the unsuspecting world recessionary pinch had apparently been diverting sales from the retailing giant, which ranks 26th in the Top Thousand profitmakers and claims to sell 3 percent of all Britainhs retail merchandise. British Home Stores in 1979, for example, showed year-end increases of over 25 percent.

Retail troubles are still apparent to London shoppers. Traditional summer sales are being jerked forward several weeks ahead of planned deadlines with deep -- and growing deeper -- price cuts. The leader in these changing times continues to be British Home Stores whose final 1979 performance requires attention. With sales totaling only 20 percent of those of M&S, BHS produced one-third as much profit.

Analysts say it has been done partly by closely watching leading price points. If known best-sellers show a tendency to sales lag after any increases, then prices are returned to a range where there is customer acceptance. BHS and others have also cashed in on sales of lower-quality merchandise.

M&S, with an unquestionable reputation for high and superlative quality merchandise, has for years kept lower-standard good away from its counters. But others have found a need to cater to the British buying public with lower-gauge, less-heavy, sometimes shortcut-made merchandise. Retailers know these goods are not necessarily inferior -- just made to meet a needed price in times when the bying public cannot afford to shop near the top of the line.

Imports, too, are appearing more and more on Britain's garment racks and counters. Imports made up 29 percent of the country's clothing sales in 1979. It may mean something in changing customer preferences to read that 90 percent of the M&S clothing stock was British-made against some 70 percent at BHS. Competitors of M&S say today's imports are not only providing adequate profit margins but are satisfying the need for advanced styling and desired new features.

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