The retail sector is " torrid", but margins in 2005 can still increase if firms embrace production in the Far East, the chief executive of menswear group Moss Bros claimed yesterday.
Philip Mountford, speaking at a a CBI event at Pinsent Masons in Birmingham, said that revolutionising the group's supply chain was part of several steps taken to turn around the menswear group.
Moss Bros upped its production in China from four per cent to 23 per cent which, said Mr Mountford, helped raise profit margins for the group by two points.
He said: "Don't underestimate China - the production is far superior than anything we see produced in the UK, Germany or Italy.
"The only downside is long lead times. For a fastchanging brand such as Cecil Gee, it is almost impossible to produce in the Far East.
"Therefore we balance production between Eastern Europe and the Far East. For a short lead we would manufacturer in Turkey and, once happy with product sales, move production to China."
Mr Mountford was appointed chief executive of Moss Bros in January 2004, mid-way through a tough restructuring of the firm to save it from financial disaster. He had previously been in the position of buying and trading director for the firm.
Mr Mountford said the key to successful outsourcing abroad was to retain control of design in the UK.
"We are part of retailers such as Next and Marks & Spencers who are keeping control of the design of their clothing. Retailers such as Suits You and Ciro Citerio are buying off the shelf abroad which means that their styles are more likely to become homogenised," he said.
Other turnaround activities included undertaking store refits to maximise on square footage, redeveloping brands and a Moss Bros catalogue which will eventually move online.
However, the retail market still remains cutthroat, with high-profile casualties. Mr Mountford had a few tips for struggling retailer Marks & Spencers.
He said: "Stuart Rose, M&S' chief executive, faces a big challenge. If I were in his position I would completely remove the quality control department of that firm and place stock quality responsibilities and costs with the suppliers.
"However, M&S is not to be underestimated - it is still a key player."
Mr Mountford admitted that potential competitors were increasing, often from other sectors.
"Everyone is a threat. TK Maxx is a threat. Tesco has four per cent of the shirt market, which is a larger hold than ours.
"We have no room to be complacent. However, we have laid down the gauntlet for ourselves that as long as we are a small and flexible company there is no reason why we can't respond to these pressures and succeed," he said.