Jessops profit warning adds to retail woes

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The Independent Online

A global shortage of digital SLR cameras due to production problems at Nikon and Canon forced Jessops to issue a profit warning yesterday after its sales slumped over Christmas.

Despite Jessops' setback, fears that Christmas would be a washout for the high street were confounded by figures from the British Retail Consortium (BRC) showing that total sales in December grew by 4.4 per cent. On an underlying basis, growth was 2.5 per cent, which was better than some analysts had predicted. The breakdown by sector provided further evidence that trading was patchy, forcing many retailers into offering early discounts to lure in shoppers. Sales of clothing, footwear, do-it-yourself products, furniture, homewares and leisure goods were largely discount-driven, the BRC said.

Kevin Hawkins, the lobby group's director general, took a swipe at some of the bleaker forecasts made before Christmas. He said the average experience was "broadly as we expected - not a bonanza but a long way from the disaster predicted by at least one City luminary."

He was referring to a warning from Richard Ratner, at Seymour Pierce, that it would be the toughest Christmas for more than 25 years. Yesterday, Mr Ratner defended his prediction, insisting: "For the bulk of mid-market, commodity players, it has actually been pretty awful." The exceptions were upmarket retailers, food groups and internet players, he added.

Jessops' unexpected stock problems tipped the retailer into a growing camp of festive losers that includes the CD-to-books group HMV, the camping specialist Blacks Leisure and Woolworths, the general retailer. Already two big retailers have had to call in administrators: Music Zone, the CD chain, and Greetings Card Group, which traded under the Cardfair and Card Warehouse brands.

Like-for-like sales at Jessops fell 6.9 per cent in the six weeks to 5 January, reversing a trend that had been positive until it ran out of stock of its two most popular models made by Canon and Nikon. A sharp drop in prices of digital SLRs had put them within reach of the amateur photographer for the first time, which Jessops had hoped would prompt owners of compact digital cameras to trade up to better models.

Chris Langley, Jessops' chief executive, said the supply shortfall knocked "several percentage points" off its top line, compounding a "soft" digital compact camera market.

Shares in the company, which has been an erratic stock-market performer since floating in autumn 2004, fell 15 per cent to 126.5p after analysts cut their annual profit forecasts by about 12 per cent to £16.5m. Competition in the camera market has intensified in recent months, particularly from online rivals.

Elsewhere, John Lewis Partnership quantified just how strong its Christmas had been. It released figures for the five weeks to 6 January that showed like-for-like sales at its department stores shot up by 10.8 per cent. Its Waitrose food chain grew its sales by 5.6 per cent on the same basis.

The department store chain had three successive record weeks, when sales exceeded £90m for the first time. It took £94m during its best week, 10 per cent more than the record set the previous year. Its best performing area was electricals and home technology, which saw sales increase by 15.4 per cent. Fashion sales rose by 10.4 per cent, while homewares were up by 9.5 per cent.

Steven Esom, managing director at Waitrose, said there was a further "flight to quality" over the festive period that played to the chain's strengths. An expansion drive meant total sales rose 10.8 per cent. Within that figure, sales of organic food rose by 15 per cent.

"Customers are cooking more," he said, pointing to strong demand for ingredients recommended by celebrity chefs such as Nigella Lawson. There was a run on maple syrup and canned prunes, as well as goose fat, he added.

Elsewhere, Clinton Cards said an increase in sales of Christmas cards offset a poor year for its gift lines, which fell by 5 per cent. Group like-for-like sales rose by 2.1 per cent in the five weeks to 24 December, including a 1.8 per cent increase at Clinton Cards and a 3.3 per cent increase at its recovering Birthdays chain.

Separately, a report showed that retailers had suffered more than other businesses last year. Equifax, which monitors people's credit ratings, said the retail sector was hit by more business failures last year than any other sector.

There were 17.2 per cent more failures on the high street in 2006 compared with 2005.

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