Retailers braced for a tough Christmas
Saturday 04 October 2008
More retailers released dire trading figures yesterday, reinforcing fears that the sector is heading for its worst Christmas in 30 years.
Weekly sales at the department store John Lewis plummeted and figures at its stablemate, Waitrose, sunk into negative territory, while the outdoor clothing retailer Blacks Leisure said it expects to post widening losses for its half-year.
The data caps a gloomy week for retailers, following the high-street bellwether M&S's trading update on Thursday, and fuels the growing belief that the high street is heading for a dismal Christmas.
This week, only the Tesco juggernaut continued to impress with a 10.3 per cent surge in underlying pre-tax profits to £1.45bn for the six months to 23 August. Nick Bubb, a Pali International analyst, and Philip Dorgan, a Panmure Gordon analyst, both raised the spectre that this could be the worst Christmas since the 1970s.
Retailers are feeling the pain as consumers are faced with soaring utility bills and food prices while dealing with falling house prices.
Neil Gillis, the chief executive of Blacks Leisure, which owns the Blacks and Millets retail chains, said: "We have been in a retail recession for the past three to four months. I talk to a lot of other retailers and there is more bad news to come out of the retail sector going forward. Retailers see discretionary spend becoming even tighter in the future." Asked when conditions will improve, Mr Gillis said: "It is going to take a long time. It has moved from being a banking crisis to being a full-blown retail recession."
Even two of the sector's strongest retailers, John Lewis and Waitrose, have been hit hard by the turmoil spilling over from the financial sector. Yesterday, John Lewis posted one of its worst performances of the year, with sales down 8.3 per cent to £48.7m. Dan Knowles, the department store's director of selling operations, said: "A combination of unseasonably sunny, warm weather and a huge amount of coverage of the global economic situation added together to give a very tough trading week."
This year, sales at John Lewis's home department, which covers pots and pans, furniture and carpets, have been hit by the housing market being in the doldrums and are down on last year, said Mr Knowles.
However, for the week ending 27 September, John Lewis performed strongly in fitted kitchens, large electricals and flooring, as customers choose to improve their homes instead of moving.
Its stablemate, the supermarket chain Waitrose, posted negative sales for only the second time this year, with a drop of 0.7 per cent for the week. The previous fall was related to Easter falling at a different time this year.
While Waitrose has sharpened up its pricing over the past year, it is losing some customers to grocers perceived to be cheaper, such as rival supermarkets Asda, Tesco, Morrisons and Sainsbury's, as well the discounters Aldi and Lidl.
However, some industry experts are more optimistic. Gavin George, the head of retail at Ernst & Young, said: "Everyone has planned accordingly. No one has forecast massive like-for-like growth – stock levels are down."
Feeling the pinch Struggling high-street chains
The pick 'n' mix-to-DVD retailer is suffering from gaps in the availability of stock on its shelves.
The owner of the Currys and PC World retail chains has seen sales of white goods, TVs, stereos and PCs fall.
*Land of Leather
The furniture retailer was forced into a financial rescue package this summer, after its sales and share price tumbled.
The sports retailer posted dire half-year profits last month, and was singing the blues when England failed to qualify for this year's European championships.
*Marks & Spencer
The high-street chain is losing food customers to Tesco and Asda, and clothing customers to Primark.
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