Retailers report struggling profits
Thursday 07 April 2011
The fragile state of the UK economic recovery was underlined today after Halfords and Carpetright served a double dose of retail woe.
The recognised retailers, who both warned full year profits would fall short of previous expectations, joined a list of struggling UK companies to have flagged challenging conditions in recent months.
The gloom-laden climate has seen the likes of entertainment group HMV, Currys parent Dixons Retail and department store owner John Lewis report disappointing sales in 2011.
The sentiment towards the industry is reflected on the stock market, where retailers' shares have suffered from consistent declines.
A key survey earlier this month offered some hope as it revealed the UK services sector - the biggest in the UK economy - grew at its fastest pace for more than a year in March.
But the precarious position the retail sector finds itself in will trouble Chancellor George Osborne, who has pinned his hopes for recovery on the private sector, and the Bank of England, which is faced with balancing soaring inflation and sluggish growth.
In a third quarter update, Halfords warned profits would be lower than expected as decent cycle sales were overshadowed by a poor performance in car maintenance.
The group, which has 464 stores in the UK and Ireland, said it expected full year pre-tax profits to be between £124 million and £127 million, down from a previous range of £127 million to £135 million. Last year, the company reported pre-tax profits of £109.7 million.
Looking further ahead, chief executive David Wild said trade would continue to be difficult.
"It's a very uncertain environment," Mr Wild said. "We have to trade the business as hard as we can. When there will be a recovery in consumer spending, it's difficult to call."
Carpetright issued its second profits warning of the year in a further blow for the floor coverings firm as it battles weak consumer confidence.
The retailer's shares dived 7% after it warned profits for the year to the end of this month were likely to be no better than the level achieved in the 2008/09 financial year, when it made a surplus of £17 million.
It has seen no let-up in grim trading conditions as households put off major purchases in the current uncertain economic climate.
Embattled retailer HMV earlier this week issued its third profits warning this year as trade failed to pick up since Christmas, while John Lewis last week reported its worst weekly sales in nearly two years.
Marks & Spencer bucked the trend yesterday with better-than-feared sales for the 13 weeks to April 2, but the 0.1% like-for-like growth still represented a sharp slowdown from previous quarters.
The FTSE 100 Index fallers' board was full of retailers today, including Next, B&Q parent Kingfisher, Marks & Spencer and designer label Burberry, as traders avoided the troubled sector.
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