M&S shares sink on black day for the high street
Thursday 03 July 2008
The UK retail sector had its very own black Wednesday yesterday, when a disastrous profit warning from Marks & Spencer sent shockwaves through the sector and the retailer's share prices plummeting.
All the foreboding about the depth of the meltdown in the retail sector was laid bare when the M&S chief executive Sir Stuart Rose unveiled tumbling like-for-like sales and signalled the good times were well and truly over. "We have had 10 years of boom time, everyone now has to swallow hard and cut their cloth according to their means," said Sir Stuart.
Shares in M&S tumbled by nearly 25 per cent to 240p – its lowest price since June 2001 – but it was far from alone. Its rivals also suffered, with Next down 8 per cent to 837.5p, and Debenhams down 11.8 per cent to 37.5p. But other retailers such as the supermarket chain Sainsbury's and the DIY group Kingfisher, which owns B&Q, also fell.
The problem for retailers is that there are no silver linings on the horizon or an end in sight to the credit crunch. Yesterday, the Organisation for Economic Cooperation and Development (OECD) turned the screws by forecasting that unemployment in the UK will rise by 100,000 over the next two years.
Not surprisingly consumers are starting to tighten their purse strings with great gusto, as the impact from soaring food, utility and petrol bills starts to bite. This week, a confirmation of falling house prices across the country from Nationwide only added to the darkening clouds hanging over UK Plc.
A further sign of the hardship facing retailers came as the kitchen equipment and retailer ProCook fell into administration, joining a 2008 list that includes the shoe chain Dolcis, the furniture retailer Ilva, the discount bookseller The Works and the fashion retailer MK One.
Other retailers are sure to follow, with several in the beleaguered furniture sector particularly vulnerable. If M&S is having problems, it is likely to be far worse for many other retailers.
Publicly listed retailers have posted the highest level of negative trading statements in three years during the second quarter of 2008, according to the accounting firm Grant Thornton. Its retail services team head David Bush said: "High street retailers are starting to feel the full impact of the credit crunch. There appears little likelihood of a significant turnaround in the short term."
Two days ago, Carpetright's chairman Lord Harris of Peckham said that next year could be one of the most difficult of the past 50 years.
The bad news for consumers is that the prices they pay in stores only look set to rise, as retailers are hit by soaring inflation in their operations and the strong euro against the pound.
Lord Harris said soaring oil prices and the buoyant euro had added 10 per to the cost of making carpets this year, while even Tesco – which continues to deliver strong growth – said this week it had raised the price of a kilogram of bananas by 10p as a result of inflationary pressures in its supply chain.
Amid the gloom, there are some retailers who are bucking the trend, but they are mostly those serving the well-heeled, such as Burberry, or those at the discount end of the market. Sales at the discount grocers Aldi and Lidl are booming, as middle-class shoppers ditch any previous delusions of grandeur and start hunting down bargain groceries.
But most retailers are feeling the pain of the shoppers coming through their doors, albeit at a declining rate.
As Sir Stuart said: "We have to trade the business hard and make sure we are fully equipped to deal with a longer than expected downturn." The consumer will also need to batten down the hatches because they could be in for a rough and lengthy ride.
- 1 Howard Jacobson: Let's see the 'criticism' of Israel for what it really is
- 3 Belgium fan Axelle Despiegelaere lands L'Oreal campaign after World Cup viral photo
- 4 Britney Spears sings 'Alien' without Auto-Tune in embarrassing leaked audio clip
- 5 PornHub begs users to stop uploading video clips of Brazil getting beaten 7-1
Instagram of US airport security chiefs: Lipstick knives and IED training kits among items seized
Game of Thrones author George RR Martin says 'f*** you' to fans who fear he will die before finishing Westeros saga
Mick Jagger denies being World Cup curse and reason for Brazil’s embarrassing defeat
Israel-Gaza crisis: ‘We just want it to end… We don’t deserve to live like this’
Israel-Gaza crisis: Eight killed in Gaza Strip cafe while watching World Cup semi-final
Sustained immigration has not harmed Britons' employment, say government advisers
Australia facing international condemnation after turning around Sri Lankans at sea
7/7 memorial defaced on anniversary of 2005 attacks with ‘Blair lied thousands died’ graffiti
Even when it brutalises one of its own teenage citizens, America is helpless against Israel
Socialist Worker called to apologise over ‘vile’ article saying Eton schoolboy Horatio Chapple's death is ‘reason to save the polar bears’
There’s a nasty smell in the political air – and it’s coming from the Tories
iJobs Money & Business
£300 - £350 per day + competitive: Orgtel: My client, a leading bank, is curre...
£28000 - £32000 per annum + pension, 25 days holiday: Ashdown Group: A highly ...
Negotiable: Randstad Education Birmingham: Randstad Education are seeking a Fi...
£12 - £15 per hour: Cameron Kennedy Recruitment: Excellent opportunity to join...