Worst spell in two years as retailers hit by slump
Apr 8 2008 by Peter McCusker, The Journal
SLOWING house prices and a clampdown on consumer lending saw retailers suffer their worst quarter in two years. Almost a quarter of all stock market-listed retailers reported downbeat sales in the first three months of 2008 as cash-strapped consumers struggled to find credit, according to accountants Grant Thornton.
The group’s retail companies index found that 23% posted negative trading updates – more than double the 10% seen in the first quarter of 2007 and the highest quarterly figure since the beginning of 2006.
The data also showed that the number of retail firms warning over profits rose to eight in the first quarter – also the highest for two years – with the recent cut in interest rates failing to shore up consumer confidence.
Only 37% of listed retailers reported positive trading for the first quarter, down from 41% in the final three months of last year, said Grant Thornton.
Retailers have been hit by a marked slowdown in consumer spending as the credit crunch has led lenders to restrict unsecured lending to borrowers. Firms including Currys owner DSG International, Land of Leather and Moss Bros have cautioned that profits will miss market expectations in recent months as trading has dipped, with fashion and “big ticket” furniture and electrical sales taking the biggest knock. Retailers linked to the housing market have also endured tough trading, said Grant Thornton.
David Bush, head of Grant Thornton’s retail services team, said: “The restriction in unsecured bank lending to consumers and the slowing of house prices has had a greater impact on retail spending than the cut in interest rates since Christmas.”
He added: “The current mood on the high street is that of general nervousness and consequently this has led to a cut in consumer spending. This research shows that the first three months of 2008 have got off to a shaky start and that for the immediate future there is no short-term end to the consumer spending downturn.” But the research suggested that consumers are still prepared to splash out on food and drink, with Grant Thornton’s study showing that all listed food firms have enjoyed a rise in like-for-like sales for the past six quarters in a row.
Supermarket Sainsbury’s last month beat analyst forecasts with news of a 4.1% leap in fourth quarter like-for-like sales, with similar upbeat trading statements from Morrisons and Asda.
