Clothing and Accessories

1. Introduction

The UK clothing and accessories industry was affected by the economic crisis in 2009. However, growth has since been achieved after that, although the market was not believed to be reaching its full potential. Companies within the industry not only continue to open both national and international stores, but also launch online stores to develop the brand much wider globally. Currently, clothing and accessories industry remains volatile for a number of competitors, which has resulted in many leading retailers entering administration.

This report focuses on four popular UK based clothing and accessories companies listed on the London Stock Exchange, which are Burberry, Mulberry, Supergroup and Ted Baker. Burberry, as a UK luxury brand, provides luxury clothing and accessories through diversified networks. In 2012/2013, this group achieved another financial result and it was once again listed in the world’s 100 most valuable brands by Interbrand. Mulberry is another a British design company who manufacturing and sourcing luxury products and it is renowned worldwide for its craftsmanship and quality. Supergroup, on the other hand, combines Japanese graphics and American style together. The brand mainly targets at young people between 15 and 25 years old. Finally, Ted Baker, established in 1988 as a shirting specialist, is famous for its quirky but commercial and high quality fashion offering. It also focuses on a multi-channel distribution strategy same as the other companies.

This report discusses the recent financial performance and current position of the sector through analysing the performance of the above companies in four aspects- investment, profitability, liquidity and gearing. It points out some possible reasons for the results and issues that may be facing the industry. Moreover, the report displays a development of this sector in the future.

2. Investment Performance

All of the companies within clothing and accessories sector have a relatively strong ability to generate profit from one unit of assets employed. This can be seen from the results of ROCE this year that companies have a ratio of 29.24% (Burberry), 32.44% (Mulberry), 20.22% (Supergroup) and 29.70% (Ted Baker) respectively. Comparing to the results of last year, only Ted Baker’s ROCE slightly increases, while all others’ ROCE decreases. Among those, Burberry and Mulberry experience the most reduction. Specifically looking at Burberry, the decrease in ROCE is mainly caused by an decrease in operating profit and an increase in operating expenses to expand new selling spaces (Burberry, 2013, p.57). Although other companies report a less reduction in operating profit or even an increase, they are all expanding their market throughout the world. By inference, ongoing expansion in this sector may possibly weaken companies ability to generate profit from