Fears for festive trading after high street sales sink

CBI says consumers are likely to remain cautious because of the uncertain economic climate

The writing appears to be on the wall for a poor Christmas on the high street after retailers suffered their "fastest" fall in sales for more than two and a half years in November, according to the business body CBI's latest survey.

This marked the sixth consecutive month of declining sales, while the fashion group Jacques Vert added to the sense of foreboding yesterday with a profits warning.

This followed the outdoor specialist Blacks Leisure forecasting an earnings shortfall on Friday and, the day before, Sir Philip Green's Arcadia Group, which operates Topshop and Bhs, delivering a 38 per cent drop in profits in the year to 27 August.

The CBI's Distributive Trades Survey found that 44 per cent of retailers reported falling sales between 27 October and 16 November, giving a negative net balance of 19 per cent.

While this was an improvement on the previous month's balance of minus 11 per cent, the latest figures were significantly worse than expectations of a positive balance of 4 per cent.

Ian McCafferty, the CBI's chief economic adviser, said: "Retailers remain hard-pressed, even as we get closer to Christmas." Indeed, the November data represented the fastest fall in sales since a balance of minus 44 per cent in March 2009.

The warm recent weather has dealt a particular hammer blow to fashion retailers' sales of winter clothing, although most grocery and non-food chains will want to forget 2011. Mr McCafferty said: "Retailers may be hoping that shoppers will loosen their purse strings in the run-up to Christmas, but consumers are likely to remain cautious about spending given the uncertain economic outlook."

A net balance of 39 per cent of retailers said sales volumes were "below average" for this time of year, with clothing chains, grocers, specialist food and drink stores and department stores all suffering falling sales.

This downturn has resulted in 40 per cent of retailers cutting their headcounts, although 13 per cent added to staffing levels, which was the worst jobs performance since November 2009.

Looking ahead, retail restructuring firms expect a number of struggling chains to fall in the first quarter. This is the period that banks and other creditors, such as suppliers, typically have their lowest exposure to retailers.

Not only is the cash position of most retailers positive after Christmas trading, but this is also when their stock requirements are low during what is typically the quietest trading period of the year.

The CBI said a balance of 8 per cent of retailers feel more negative about the business environment over the next three months they did a quarter ago.

But it is not all doom and gloom and many big retailers, from the DIY group Kingfisher to the fashion chain Next, continue to grow profits.

Richard Lowe, the head of retail and wholesale at Barclays Corporate, said: "Provided the snow holds off, retailers are still expecting this Christmas to be better than last year."