Retailers' shares go on sale amid fears of slump

Hopes of a bumper end to the year for retailers faded yesterday after figures showed the post-Christmas sales frenzy had waned.

A "marked" drop in the number of shoppers at the end of last week fuelled fears that any respite from tough trading was temporary, prompting traders to dump retail stocks. Shares in Tesco, Marks & Spencer, GUS, Woolworths and Next, which reports its Christmas figures today, werehit.

After the initial rush for Boxing Day bargains, shoppers stayed at home, according to the analysts FootFall and SPSL, which both measure shopper traffic. FootFall said 12.4 per cent fewer shoppers than the previous year were out snapping up deals from Monday 26 December to Friday 30. SPSL put the fall at 7.8 per cent, although their comparable week this year included Christmas Day.

Tim Denison, at SPSL, said: "Is it just a blip brought about by inclement weather, or is it a sign that consumers are hitting their shopping saturation levels, believing the best bargains have gone?"

Some retailers such as Debenhams have had to make further price cuts to stimulate demand.

The chocolate retailer Thorntons was the first retailer to provide a snapshot of Christmas, issuing a bleak trading update yesterday that showed its like-for-like sales decline had worsened. Thorntons, which is in bid talks with its management, said underlying sales fell 4.9 per cent in the 26 weeks to Christmas Day, triggering downgrades to analysts' profits forecasts.

SPSL added that shopper numbers were marginally down throughout December against the previous year, which was itself very weak. Only the heavy use of promotions prevented a worse month.

Some retail experts put the weak end to sales week down to the fact that retailers did not have much stock left to discount.

Paul Clarke, a director for retail and wholesale at Barclays, said: "There isn't a big overhang of stock so the sales won't have been that exciting."

A spokeswoman for the MetroCentre in Gateshead agreed. "I think the sales finished quite early this year," she said.

Iain Macdonald, a retail analyst at Numis Securities, said: "Overall, I don't think there has been a lot of growth. If there have been a few winners, then on the other side of the coin there must be some losers."

Richard Ratner, at Seymour Pierce, said: "2006 could be worse than 2005."