Sequential and year-over-year movements in gross margins require the attention of retailers as do other financial variables. However, retailers must consider the seasonality of retailing. Typically retailers observe soaring revenues during the last quarter of the year, primarily driven by holiday shopping, while post-Christmas season sales are a sure flop. Overall, understanding gross margin trends will offer retailers a more accurate picture of current and future earnings. Retailers experiencing declining gross margins are likely heading down south may be because of declining customers, increasing costs, and/or heavy mark-downs.
Christmas season sale
The retail industry is largely dominated by food retailing. This is chiefly because food is man’s most essential need and bought on a daily basis as opposed to clothing or shelter. In the U.K., nearly all of the food retailing market is served by supermarkets and convenience stores, which are displacing traditional retailers. Competition in the U.K. retail industry is chiefly based on prices, which would translate into low margins and stunted industry growth. It is important for retailers to innovate and invent ways to survive tough competition and extreme price wars.
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