Department stores delight

Strong performances from premium operators such as Harrods, Selfridges and Harvey Nichols have driven a sustained growth spurt over the past two years in the overall department store sector.

According to data from Verdict Research, those top-three London department stores were ‘instrumental’ in sustaining the growth in the sub-sector in 2007 in their sixth year
of superior expansion.

Verdict sees a third strong year shaping up for department stores in 2008, with lead retail analyst Maureen Hinton observing that market leaders Marks & Spencer, John Lewis, Debenhams and House of Fraser all have extensive store opening plans in 2008, which should ensure market growth.

‘As money becomes tighter, consumers are more selective about where they spend and are more in need of a rewarding and indulgent shopping experience to lighten their mood,’ she says. ‘These retailers are creating a virtuous circle by investing in their stores and ensuring that the store experience matches the aspirational status of the
brands they stock.

‘This not only differentiates them from the rest of the high street, and crucially from supermarkets‚ but also provides consumers with a pleasurable shopping experience that combines the convenience of having a comprehensive offer in one location with leisure and indulgence.’

City analysts, in contrast, see a dim near future, even with the UK retail sector trading at just over ten times forecast earnings. Andrew Wade at broking house Seymour Pierce believes the industry has yet to hit rock bottom. ‘We now believe that trading has continued to slow, particularly at the fashion retailers, with footfall down and even those that do shop spending less,’ he warns.