The UK retail industry’s Brexit-linked turmoil deepened as J Sainsbury said it would cut as many as 2,000 jobs, Zalando said the market is losing attractiveness and rival online fashion site Asos discussed contingency plans.
Sainsbury’s move follows Tesco, which announced 1,200 head-office job cuts in June. Asos, which sells clothing and accessories online, said on Tuesday it may handle more of its distribution activities out of Germany if the UK falls out of the European customs union. That could put a damper on growth prospects for its 4,000-employee warehouse in Barnsley, England (a town where 68% of voters favoured Brexit), although the company is continuing to invest in the site for now.
Brexit is heaping more upheaval on an already embattled industry. The country’s grocers have been grappling with discount rivals and higher staffing costs, while fashion retailers struggle against consumers’ preference to spend their disposable income on leisure activities rather than clothing.
The pound’s decline since the Brexit vote has pushed up sourcing costs: UK inflation climbed to its highest rate in more than five years in September, led by food and transport. And the risk of the UK falling out of the customs union leaves retailers wondering how they will be able to stock their shelves amid backlogs at ports.
Zalando, a German online clothing retailer that’s Europe’s biggest response so far to Amazon.com, said yesterday that Britain’s decision to leave the European Union is weighing on the market’s prospects.
“We would like to ramp up investments in our UK business, but Brexit is posing a problem,” Zalando co-chief executive officer Rubin Ritter said in a phone interview. “If the new regime limits the flow of goods, it would be a challenge.”
Sainsbury said 1,400 payroll and administrative jobs in its supermarket business may be made obsolete by the introduction of a new information-technology system. It will also axe as many as 600 further human-resources roles due to a restructuring that will consolidate activities among Sainsbury’s supermarkets, home-goods and electronics seller Argos and Sainsbury’s Bank.
Asos on Tuesday reported sales growth in the UK decelerated to 16%, making it the company’s worst-performing region. That pales in comparison with the 47% spurt in its international business. Asos now gets almost two-thirds of its £1.88bn ($2.49bn) in annual retail sales outside its home country.
Sainsbury’s latest round of cuts is the largest single amount the grocer has made under chief executive officer Mike Coupe.
The London-based retailer is in the final year of its three-year plan to slash costs by £500mn and has said a new three-year plan to cut £500mn of costs will begin next year.
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