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Business News

Retail gloom deepens after dire August for the high street

Trading conditions on the high street deteriorated to their worst levels for more than a year in the first half of August and retailers remain resolutely downbeat on the outlook for the sector, according to a survey from the Confederation of British Industry.

Further evidence of the dire summer suffered by most retailers was laid bare by Topps Tiles, the tiling specialist, which issued a profits warning yesterday after sales plummeted in the first seven weeks of its fourth quarter.

Far worse news came from Floors-2-Go, the laminate floor retailer, which collapsed into administration for the second time in three years yesterday. Its administrator, Senate Recovery, said that 53 stores had closed, with the loss of nearly 200 jobs, but 35 shops have been salvaged from the wreckage and are still trading under a newly formed acquisition vehicle.

Most retailers see few, if any, positive catalysts on the horizon for consumer spending – apart from a highly unlikely sharp fall in petrol prices, which have had a punishing impact on household budgets.

According to the CBI Distributive Trades Survey, 46 per cent of retailers suffered a fall in sales volumes between 28 July and 16 August, while 31 per cent posted a rise. The rounded negative balance of 14 per cent was worse than expected – and the poorest figure since May 2010. Judith McKenna, the chief operating officer of the Walmart-owned supermarket chain Asda, said: "As expected, August was a tough month on the high street. Sales volumes fell at a pace not seen in over a year, as consumers have continued to see their real incomes squeezed by a combination of inflation and weak wage growth."

Ms McKenna, who is also the chair of the CBI Distributive Trades Panel, said: "This survey suggests that prices will rise more slowly in the coming months, and savvy retailers will continue to offer consumers the lowest prices possible, but with energy and commodity costs still high, families' spending power looks like being constrained for some time."

The worst performers in August were retailers of clothing, specialist food and drinks, durable household goods and DIY products, as well as department stores. However, those selling grocery products, footwear and leather, sold more items. As did carpet dealers – perhaps surprisingly, given the pressure on big-ticket sales.

Indeed, retailers are the most downbeat they have been for a year and a half, with a balance of 11 per cent saying they felt more negative about trading over the next quarter than they did three months ago.

The UK riots, which kicked off in London on 6 August, have only added to the pressure endured by retailers. Richard Lowe, the head of retail and wholesale at Barclays Corporate, said: "As the pressures of inflation and rising utility bills continue to bear heavily on consumer spending, conditions remain difficult for retailers, and this month's riots are only likely to have exacerbated the situation."

He added: "We've already seen a number of retailers tapping into the key Christmas season with the earliest start to Christmas displays yet." Meanwhile, Topps Tiles blamed a "decline in consumer confidence" for its recent poor performance. While its like-for-like sales actually rose by 1.9 per cent in its third quarter, they tanked by 10.4 per cent in the seven weeks to 20 August. Topps said its full-year earning were "likely to be below" analyst expectations. Numis Securities lowered its forecast for Topps' pre-tax profits to £13m from consensus of £15.5m.