Negative trading statements issued by listed retailers
continues to soar
- number of profit warnings increases
- yet like for like sales continues to increase in the
food and drink sector
The number of negative trading statements issued by retailers on
the London Stock Exchange during the first quarter of 2008
continues to increase and is at its highest level in two years,
according to new research issued by leading business and financial
advisers Grant Thornton.
The Grant Thornton Quoted Retail Companies Index* for Q1 2008
found that 23% of retailers posted negative trading updates (up
from 10% in Q1 2007) and the highest figure yet since Q1 2006 when
24% of retailers posted negative trading updates. In addition, the
number of positive trading statements dropped to 37% (down from 41%
in Q4 2007). The remaining 40% of statements were neutral in
tone.
David Bush, Head of Grant Thornton's Retail Services Team, says
:"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."
However despite the uncertainty in the retail sector, food and
drink retailers, (particularly the UK supermarkets) all reported
positive trading statements. "Ironically though, much of the
supermarkets' strong sales performance will have been as a result
of increasing their share of non food sales, particularly in the
clothing, electronics and the entertainment sectors," says
Bush.
Like-for-like sales
For six successive quarters, 100% of listed food and drink
retailers have seen an increase in like -for -like sales with no
profit warnings being issued by them over this period
"Food and drink retailers appear to have more stability in their
sales patterns with them consistently reporting 100% increase in
like for like sales over the last year and a half," says Bush.
Profit warnings
The number of retailers who issued profit warnings in the first
quarter increased to eight. All eight warnings were issued from
retailers involved in high ticket range goods with representation
from the fashion, electricals and furniture sectors (including DSG
International , Land of Leather and Moss Bros Group) - these being
the sectors most hard hit as the downturn in consumer spending
starts to really hurt UK retailers. "We have observed that in the
last three months retailers linked to the housing market have also
been generally impacted by the current economic downturn," says
Bush.
"The current mood in 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," says
Bush.
* Grant Thornton's Quoted Retail Companies Index is a review of
the quarterly trading statements issued between 1 January and 31
March 2008 by those General Retailers and Food & Drug retailers
listed on the London Stock Exchange.