Two major retailers feel affect of sales slowdown

Sep 11 2008 by Peter McCusker, The Journal

TWO major retailers reflected the gloom being felt on the high street after reporting slumps in profits and sales. Fashion chain Next saw a 12% drop in half-year profits and said it was budgeting for autumn and winter sales to be down by between 4% and 7%.

And the owner of electrical retailer Comet said the high street chain would slump to a first half loss this year after sales of white goods dived.

Kesa Electricals said Comet’s like-for-like sales fell 9.9% during the three months to July 31, with “particularly weak” sales of household electrical appliances.

Next profits for the six months to the end of July fell to £173.5m from £198.2m, but this was slightly ahead of City forecasts.

The group also said its projection for annual profits remained in line with City forecasts for a surplus of between £400m and £440m. Next said its resilient performance reflected tighter control on stock levels, resulting in a 20% reduction in items in the end of season sale, coupled with ongoing efforts to improve the quality and design of its clothing.

And by the end of the financial year it expects to have invested £40m in store refits, meaning 69% of its space will be new or redecorated.

Kesa chief executive Jean-Noel Labroue said: “As a consequence, we now anticipate Comet will make a loss in the first half.”

Comet, which has 251 UK stores, makes up nearly 40% of Kesa’s total sales.

Mr Labroue said: “This quarter has, as anticipated, been very tough.

“Trading conditions across all our markets deteriorated, particularly in the UK, and have not changed since the period end.”

He warned earlier this year of slower sales of goods such as fridges, freezers and washing machines, the market for which has been hit by the wider housing market slowdown.