Investors go cold on retail - Business - News - The Independent

Investors go cold on retail

Confidence hit by first drop in sales for three years

RETAIL-industry stocks are about as hot as last season's fashions as consumers watch their wallets and investors shop elsewhere for bargains.

Shares in once-modish consumer, pub and leisure companies have plunged. An investor holding an index-weighted selection of FT-SE 350 general retail stocks would have seen 8 per cent wiped off its value since the start of June. Brewing stocks have dropped 7 per cent and leisure companies 13 per cent. The total index has slipped 1 per cent.

Last month, the Office for National Statistics posted the first annual drop in general retail sales for almost three years as six increases in interest rates took their toll. GfK, a consumer-research company, said consumer sentiment turned negative for the first time since April 1997. More recently, though, positive news from companies such as Debenhams has clouded the picture.

"No one knows which way the economy is going. People feel there's no place to hide," said Fraser Ramzan, an analyst at Lehman Brothers.

PaineWebber International says it expects consumer spending to grow 3.9 per cent this year, down from 4.6 per cent in 1997, slowing to about 2 per cent in 1999. A manufacturing slowdown "is starting to feed through into the rest of the economy", said economist David Brickman.

Retailers tend to feel the first chill of a slowing economy as consumers rein in spending in stores, particularly those selling big-ticket items such as furniture and electrical goods.

Hotels are also sensitive to economic downturns, when business travel declines and people cannot afford holidays. Pubs and restaurants are not immune, even though leisure spending is forecast to command an increasing proportion of household spending.

Companies such as Scottish & Newcastle, Whitbread and Allied Domecq, have funnelled millions of pounds into branded pubs, and some analysts fear that has created too much capacity. And nightclub operators such as First Leisure are finding consumer enthusiasm dwindling.

Analysts are not sure what this all means. "What's hard to define is how much is about the weather and the World Cup and what is wholly economic," said Christopher Page, an analyst at Goldman Sachs. "We may not know that until we get into the autumn."

The trading picture is contradictory. Recent evidence from companies such as Debenhams and Blacks Leisure Group suggests sales recovered in July.

"I don't think it's all doom and gloom, but in the second half of the year there will be shock news because of the strength of last year," said Robert Clark, a director at Corporate Intelligence on Retailing.

Samantha Gleave, an analyst at Sutherlands, said the big companies are in the best position. She recommends Marks and Spencer, Dixons and Great Universal Stores. "Some of the big stores like Marks & Spencer perform better in a recession," she said. "Big companies are able to generate economies of scale."

Iain Wilkie, a partner in the hospitality and leisure division of Ernst & Young, agrees that might is right. "People will move towards quality," he said. "If you have a brand that people understand, it is going to hold up much better." He also expects the health and fitness industry to hold firm: good news for companies such as Stakis, which wants to double its health-club membership by the end of 1999.

Two factors mitigate against pessimism. Lean, 1990s-style companies are better equipped to cope with a downturn than at the turn of the decade. Further, most analysts expect the slowdown to be gentler than last time.

Suggested Topics
John Travolta is a qualified airline captain and employed the pilot with his company, Alto
people'That was the lowest I’d ever felt'
Life and Style
healthIt isn’t greasy. It doesn’t smell. And moreover, it costs nothing
peopleThe report and photo dedicated to the actress’s decolletage has, unsurprisingly, provoked anger
Home body: Badger stays safe indoors
The programme sees four specialists creating what they believe are three perfect couples, based on scientific matchmaking. The couples will not meet until they walk down the aisle together
tvUK wedding show jilted
Arts and Entertainment
US pop diva Jennifer Lopez sang “Happy Birthday” to Gurbanguly Berdimuhamedow, president of Turkmenistan
musicCorporate gigs become key source of musicians' income
Arts and Entertainment
You've been framed: Henri Matisse's colourful cut-outs at Tate Modern
artWhat makes a smash-hit art show
ebooksAn unforgettable anthology of contemporary reportage
Arts and Entertainment
While many films were released, few managed to match the success of James Bond blockbuster 'Skyfall'
filmsDaniel Craig believed to be donning skis as 007 for first time
Mikel Arteta pictured during Borussia Dortmund vs Arsenal
champions league
Yes supporters gather outside the Usher Hall, which is hosting a Night for Scotland in Edinburgh
voicesBen Judah: Is there a third option for England and Scotland that keeps everyone happy?
Arts and Entertainment
Pulp-fiction lover: Jarvis Cocker
booksJarvis Cocker on Richard Brautigan
Arts and Entertainment
Robin Thicke and Pharell Williams in the video of the song, which has been accused of justifying rape
music...and he had 'almost no part' in writing it
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Sales Executive

£20 - 24k (Uncapped Commission - £35k Year 1 OTE): Guru Careers: We are seekin...

Payroll & Accounts Assistant

£20 - 24k + Benefits: Guru Careers: This is a great opportunity for an enthusi...

SQL Developer - Watford/NW London - £280 - £320 p/d - 6 months

£280 - £320 per day: Ashdown Group: The Ashdown Group have been engaged by a l...

Senior BA - Insurance **URGENT**

£400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...

Day In a Page

Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments
These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

Widespread fear of Isis is producing strange bedfellows

Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
Topshop goes part Athena poster, part last spring Prada

Topshop goes part Athena poster, part last spring Prada

Shoppers don't come to Topshop for the unique
How to make a Lego masterpiece

How to make a Lego masterpiece

Toy breaks out of the nursery and heads for the gallery
Meet the ‘Endies’ – city dwellers who are too poor to have fun

Meet the ‘Endies’ – city dwellers who are too poor to have fun

Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

Ian Paisley’s decision to make peace with his IRA enemies

His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam
'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

Exclusive extract from Janis Winehouse's poignant new memoir
Is this the role to win Cumberbatch an Oscar?

Is this the role to win Cumberbatch an Oscar?

The Imitation Game, film review
England and Roy Hodgson take a joint step towards redemption in Basel

England and Hodgson take a joint step towards redemption

Welbeck double puts England on the road to Euro 2016
Relatives fight over Vivian Maier’s rare photos

Relatives fight over Vivian Maier’s rare photos

Pictures removed from public view as courts decide ownership
‘Fashion has to be fun. It’s a big business, not a cure for cancer’

‘Fashion has to be fun. It’s a big business, not a cure for cancer’

Donatella Versace at New York Fashion Week