Negative trading statements issued by listed retailers continues to soar
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 by 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.
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.
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.
