Global Economics

Retail Slump Easing in Britain?


The country's No. 2 apparel seller, Next, announced better-than-expected quarterly results, raising cautious hopes of a rebound on the High Street

Next (NXT.L) became the latest retailer to signal that the worst of the retail slump could be over yesterday, as the later Easter and warm recent weather helped the fashion chain post better-than-expected first-quarter sales.

But Simon Wolfson, the chief executive of Next, remained cautious about the outlook for the sector, forecasting that Next will post negative like-for-like sales this calendar year. He said: "It has stopped getting worse, but it is not necessarily starting to get any better. That does not mean the recession is over, it has bottomed out."

The retailer, which has more than 480 stores in the UK and Republic of Ireland, posted like-for-like retail sales down by 2.3 per cent for the 14 weeks to 2 May, which was substantially better than its estimate of a fall of between 6 per and 9 per cent for the first half.

Next said it had added £15m to its full-year internal profit forecasts as a result of the rosier sales. Its robust sales follow the growth in underlying sales posted by its fashion rival Debenhams over the seven weeks to 18 April.

A cautious Mr Wolfson said the balmy recent weather had smartened up its like-for-like sales by about 2 per cent. "The warmer weather has definitely helped, as has the later Easter and more people staying at home over the holiday period because of the weak pound." Next's first-quarter retail sales rose by 1.1 per cent and its multi-channel Next Directory was up by 1.6 per cent.

Reflecting Mr Wolfson's caution, Verdict Research said that 2009 will be the weakest year for the UK retail sector since its records began in 1984. It said that total retail sales will fall by 0.6 per cent, or £1.7bn, this year. The retail research firm also forecasts anaemic growth of just 8.1 per cent over the five years to 2013, which is sharply down on the previous five year's 14.1 per cent growth.

Next forecast that its second-quarter sales, up against tougher comparables, will be weaker than the first. But John Stevenson, an analyst at KBC Peel Hunt, said that after May, the "comparatives for Next and most retailers fall away into the second half and Christmas". Next's revised first-half forecast predicts underlying sales will fall by between 4 per cent and 7 per cent.

Previously, Next has said that the weak pound will cause it to raise prices by between 3 and 5 per cent later this year, but Mr Wolfson said the increase will be at the lower end of expectations, as it has negotiated better terms with suppliers. City analysts expect Next to post pre-tax profits of £353m for the year to the end of January 2010.

Provided by The Independent—from London, for Independent minds

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