LONDON BRIEFING:Forget about Christmas past, the challenge now is to survive until Christmas 2012
THE ANNUAL avalanche of trading news from the retail sector is under way, kicking off today with Christmas sales updates from two of the high street’s biggest names – Next and John Lewis.
Barring last-minute shocks, both are thought to have fared pretty well given the dire economic backdrop. Next, the best-performing stock in the FTSE 100 last year, is expected to report an overall sales increase of about 4 per cent, making it one of the sector’s Christmas winners.
Although underlying sales at its shop chain will be down, the group’s directory mail-order arm will more than make up the slack.
John Lewis, meanwhile, has been providing weekly trading updates throughout December and seems set for a respectable outcome.
Others will not fare so well and over the next fortnight we’ll find out just how grim it has been for some of the high street’s walking wounded, notably HMV (which has already warned its future depends on a good Christmas), Mothercare, Blacks Leisure, Clinton Cards, Game Group, Comet, Thorntons, French Connection and Home Retail, owner of Homebase and Argos.
Also causing some concern to analysts is department store chain Debenhams, which was discounting heavily in the run-up to Christmas, with promotions of between 30 and 40 per cent.
Many of the losers have already warned on profits and there has been a spate of retail failures in recent weeks, including the Barratt Priceless shoe chain, privately-owned toys and gifts company Hawkin’s Bazaar, La Senza and D2 Jeans.
At Barratt Priceless, which collapsed in early December, 1,600 employees were made redundant on New Year’s Eve as the administrators struggled to find buyers for the business.
A buyer is also being sought for Blacks Leisure, owner of the Millets chain, which has already warned investors that their shares in the business are worthless.
At La Senza, the lingerie company once owned by Theo Paphitis of Dragons' Denfame, some 2,600 jobs are at risk as it closes stores in preparation for formal administration in the next few days.
Up to 1,000 jobs are also at risk at retro-themed gifts chain Past Times, which is heading for administration, and hundreds of jobs have gone at the D2 Jeans fashion chain, which went into administration last week.
There will be sales successes for some retailers – but at what cost to margins? There were unprecedented levels of pre-Christmas promotions as retailers battled to part unwilling shoppers from their cash, and that is being followed by huge January price cuts as stores struggle to clear their stock.
Even retailers who manage to come through Christmas 2011 in reasonable shape have little reason to celebrate, and the sector is already focused on surviving 2012.
Amid all the grim economic forecasts for the year, retail research group Verdict predicts that consumers will slash their spending by another £1 billion (€1.2 billion) this year, with electrical goods and big-ticket items such as carpets and furniture hit particularly hard.
Verdict forecasts UK retail sales will grow by just 1.2 per cent in 2012, to £295 billion, making it the third-slowest year in the past four decades, as households move firmly into austerity mode. That follows the second-slowest year – last year – with growth in 2011 expected to be just 0.9 per cent, a figure well short of inflation.
The worst year was 2009, when sales fell by 0.4 per cent.
The belt-tightening process began in 2007, according to Verdict, which estimates that, by the end of 2012, spending on clothing and household goods will have declined by as much as £10 billion. Food is the only real bright spot, helped by the trend towards eating at home.
Several thousand shop workers have lost their jobs in recent weeks and some of the more pessimistic forecasts suggest that figure could spiral to 40,000 this year – double the jobs toll in 2008, the year of the collapse of Woolworths. Forget about Christmas past, the challenge now is to survive until Christmas 2012.
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IT WON’T save the retail sector but the Co-operative Bank is doing its bit to help customers over their post-Christmas financial hangovers by scrapping charges on agreed overdrafts for three months.
For someone with an overdraft of £2,000, the savings would total £75, and the deal is also being offered to those who set up an agreed overdraft facility within the three-month period.
The Co-op, which has 1.5 million current account customers, says the move is not designed to encourage more borrowing but to give customers a bit of breathing space. It is not going to send anyone rushing to the shops on a spending spree but, as a gesture, particularly from a bank, it is a welcome one.
Fiona Walsh writes for the
Guardian
newspaper in London
