Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Technical analysis for shorts & longs -- Ignore unavailable to you. Want to Upgrade?

To: Johnny Canuck who wrote (42057)	12/31/2004 2:59:18 AM
From: Johnny Canuck	Read Replies (1) \| Respond to of 68499

Retail industry sees our bargain binge ending in the new year Soaring dollar meant cheaper imports Price cuts for DVDs, clothing may slow DANA FLAVELLE BUSINESS REPORTER A soaring Canadian dollar has given consumers cheaper jeans, DVDs and many other imported products in recent years. But shoppers could soon see the bargain binge come to an end as higher global oil prices and rising labour costs in China offset some of the gains made on foreign exchange rates. That's the consensus of several retailers and industry experts at the end of a year that saw the loonie gain nearly 8 per cent on the U.S. dollar to close at 83.01 cents (U.S.) yesterday. Since much of what's sold in stores comes from China — and China's currency is pegged to the sagging U.S. dollar — the loonie's meteoric rise over the last two years has made goods cheaper for retailers to import. Consumers are already seeing some of the impact in lower inflation rates, economists say, and in some categories prices have fallen dramatically, particularly consumer electronics and clothing. DVD players that a few years ago sold for $699 are now given away by some music retailers for the price of three CDs, noted the Retail Council of Canada's Peter Woolford. Jeans in the new Wal-Mart-owned Asda superstores in Britain go for as little as £5. That's roughly $10 to $11 Canadian, added retail consultant John Williams. At the same time, some retailers have reported modest improvements in their profit margins, Woolford said. Specialty women's wear retailer Reitmans (Canada) Ltd., which makes most of its clothes in China, reported sharply higher profit this year due to cost-savings. "A nice part of that came from foreign exchange," owner Jeremy Reitman said in an interview, adding that "another big part of it came from operations." But few retailers have much room to manoeuvre due to competitive pressures in the marketplace, industry observers said. "Wal-Mart keeps everybody honest," said Williams of the retail-consulting firm J.C. Williams Group, in Toronto. "There would be no gouging. It's too competitive." Clothing prices are likely to continue to fall as tariffs on fabric imported from lower-cost countries, such as China, come to an end as of Jan. 1, Williams noted. But Canadian retailers are already talking about price erosion moderating in the new year. For one thing, this year's exchange rate gains pale by comparison with last year's 20 per cent rise in the loonie relative to the greenback. At the same time, other costs are starting to rise and there's even talk that China may revalue its currency at a higher level if the U.S dollar continues to slide. "We're not seeing the deflation we had in the last three to four years," said George Heller, who heads Hudson's Bay Co., Canada's largest department store retailer, in speaking to analysts on a conference call last month. "We don't believe in '05 you'll see apparel prices dropping (the way they have in the past)." The retailers' industry association concurred. "We don't expect to see any further dramatic changes in the next year," Woolford said. Any significant currency change takes up to 18 months to work its way through the economy, he added, which means most of the impact of the loonie's rise has already been factored into the marketplace. At the same time, Heller cautioned, costs in China are starting to rise. The Asian powerhouse is feeling the same pressure from rising oil prices as North Americans have felt this year. Labour costs are starting to rise in the coastal cities where Chinese clothing manufacturers are concentrated because rapid population growth has outstripped those cities' infrastructure, he said. "As crazy as it sounds, they're starting to see pressure on labour costs," Heller said. While retailers still see more room to cut costs in the new year, Heller said, they're also hoping to use those savings to provide higher-quality merchandise instead of further cutting prices, a trend they believe consumers are ready for. "The hunt for an ever lower price in apparel seems to be coming to an end. People are prepared to spend a little bit more for brands and for fully featured products," Heller said. Some of HBC's biggest gains this fall came from sales of higher quality clothing even at its price-conscious Zellers stores. "That `Tres You' brand that Federated developed for us is really shooting out the lights," Heller said, referring to a brand created by the parent company of upscale Macy's and Bloomingdale's for sale in HBC's discount chain. The fashionable line included products like women's fully lined black leather blazers for as little as $35. As for consumer electronics, the country's largest specialty chain said it couldn't separate the impact of the rising dollar from other factors that influence the price of its products. Historically, prices of consumer electronics fall when demand for them expands, said Lori DeCou, spokesperson for Best Buy Canada and Future Shop. But the retail council's Woolford says the fact that so many consumer electronics products are now made in low-cost China has accelerated the descent. "We expect China will go on to be a source of new products and new product categories at very, very competitive prices. That's very, very good news for customers," Woolford said, noting the value of the loonie is just one factor in a far larger cost equation. thestar.com