British retailers not optimistic
By Mark Potter and James Davey |
January 15, 2010, Friday
|
Print Edition
Print Edition
BRITONS defied the recession to splash out on laptops, TVs, food mixers and robotic hamsters at Christmas, but retailers fear cutbacks this year as real incomes are trimmed by tax rises and unemployment.
Analysts rushed to upgrade 2009-10 profit forecasts for firms including electricals group DSG, household goods retailer Home Retail and bicycles-to-car parts chain Halfords, which all posted higher sales yesterday.
However, share prices mostly fell amid concerns shoppers will become more cautious when credit card bills arrive. "There's a real concern that we'll see some sort of prolonged consumer hangover as we head through 2010," said Bryan Roberts, global research director at Planet Retail.
Although Britons are benefiting from historically low interest rates, retailers fear they will suffer a squeeze this year as a cocktail of pay freezes or pay cuts, rising inflation, higher taxes and public spending cuts take their toll. A general election that must be held by June is also blurring the outlook.
"I think positive sales growth (in 2010) will be hard to come by," warned Home Retail chief executive Terry Duddy.
DSG chief John Browett said he did not expect Britain to have "a very nasty double dip" recession. "But we're not expecting strong economic growth either."
Britain is taking longer to emerge from recession than most major economies due in part to its exposure to the financial services industry that was at the heart of the downturn.
But while continental European retailers like Germany's Metro and Belgium's Delhaize have reported weaker-than-expected fourth-quarter sales, most UK chains have posted strong numbers.
A British Retail Consortium survey on Tuesday showed the biggest rise in December sales for four years.
Analysts say this is partly because British retail sales are being compared against particularly weak numbers the same time last year, and because the collapse of firms like toys-to-DVDs chain Woolworths and furniture group MFI have helped survivors.
Despite the strong headline numbers, there are signs that recessionary buying habits remain.
Discount fashion chain Primark posted a 19 percent rise in sales in the 16 weeks to January 2, well ahead of mid-market rivals like Marks & Spencer and Next.
There were also areas of significant weakness. Home Retail said jewellery sales and video games sales were weak at its Argos stores, echoing specialists like Signet and Game Group.
HMV Group posted an 8.5 percent dip in like-for-like Christmas sales at bookstore Waterstone's which could not be offset by a rise at its music, DVDs and games shops.
Chocolate retailer Thorntons also posted a fall in sales due to less discounting than last year.
Home Retail's Duddy said shoppers were still switching to cheaper products, a trend he expected to continue.
Analysts rushed to upgrade 2009-10 profit forecasts for firms including electricals group DSG, household goods retailer Home Retail and bicycles-to-car parts chain Halfords, which all posted higher sales yesterday.
However, share prices mostly fell amid concerns shoppers will become more cautious when credit card bills arrive. "There's a real concern that we'll see some sort of prolonged consumer hangover as we head through 2010," said Bryan Roberts, global research director at Planet Retail.
Although Britons are benefiting from historically low interest rates, retailers fear they will suffer a squeeze this year as a cocktail of pay freezes or pay cuts, rising inflation, higher taxes and public spending cuts take their toll. A general election that must be held by June is also blurring the outlook.
"I think positive sales growth (in 2010) will be hard to come by," warned Home Retail chief executive Terry Duddy.
DSG chief John Browett said he did not expect Britain to have "a very nasty double dip" recession. "But we're not expecting strong economic growth either."
Britain is taking longer to emerge from recession than most major economies due in part to its exposure to the financial services industry that was at the heart of the downturn.
But while continental European retailers like Germany's Metro and Belgium's Delhaize have reported weaker-than-expected fourth-quarter sales, most UK chains have posted strong numbers.
A British Retail Consortium survey on Tuesday showed the biggest rise in December sales for four years.
Analysts say this is partly because British retail sales are being compared against particularly weak numbers the same time last year, and because the collapse of firms like toys-to-DVDs chain Woolworths and furniture group MFI have helped survivors.
Despite the strong headline numbers, there are signs that recessionary buying habits remain.
Discount fashion chain Primark posted a 19 percent rise in sales in the 16 weeks to January 2, well ahead of mid-market rivals like Marks & Spencer and Next.
There were also areas of significant weakness. Home Retail said jewellery sales and video games sales were weak at its Argos stores, echoing specialists like Signet and Game Group.
HMV Group posted an 8.5 percent dip in like-for-like Christmas sales at bookstore Waterstone's which could not be offset by a rise at its music, DVDs and games shops.
Chocolate retailer Thorntons also posted a fall in sales due to less discounting than last year.
Home Retail's Duddy said shoppers were still switching to cheaper products, a trend he expected to continue.
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