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British retailers count cost of brutal Christmas trading

Reuters  |  LONDON 

By and Paul Sandle

(Reuters) - British retailers suffered their worst since the depths of the financial crisis a decade ago as cautious customers forced high street stores such as John Lewis and to slash prices to shift stock.

With Britain heading for a potentially messy exit from the at the end of March, consumer spending is drying up, exposing the weakness of many major retailers which are having to sacrifice profits in the quest for sales.

The brutal conditions come as the industry struggles to keep pace with consumers moving online, meaning many are weighed down with excess and costly store space as they invest in distribution centres and logistics.

"There's no doubt that there was significantly more promotional activity in the market, a combination of consumer confidence and the travails in the marketplace as a whole," said Paula Nickolds, of John Lewis stores.

Trading updates on Thursday showed those groups doing best such as had improved their basic ranges. Investors were also relieved that Marks & Spencer, the country's most famous retailer, had held its nerve and not cut prices, even though sales fell.

The general message was that the going was tough.

said the country's second biggest group would have to find 80 million pounds ($102 million) of cost cuts to protect its profits after slashing prices. It is closing 50 stores.

Once selling fabrics, bonnets and gloves during the Victorian era, the 241-year-old group is now fighting for its survival to avoid the fate of collapsed rival and House of Fraser, which was rescued by Sports Direct-owner

"The market in general has been very, very competitive," Bucher told reporters. The group, which has lost more than 80 percent of its value in the last year, is seeking fresh funds to bolster its balance sheet.

Halfords, which sells bicycle and car accessories, was one of the worst hit after its customers refused to spend on expensive items, forcing it to lower prices and cut its profit target. Its shares were down 25 percent.

And John Lewis, the employee-owned biggest department store, said on average promotional activity was around 20 to 30 percent higher than last year. Its staff may not receive their cherished annual bonus for the first time since 1953.

TROUBLED TIMES

Britain's economy slowed after the 2016 Brexit referendum and looks to have lost more momentum in late 2018 as struggles to get parliament's support for her plan for a smooth exit from the

The British Consortium (BRC) said its members reported zero year-on-year total sales growth in December, the worst performance for the month since 2008. The flat figure compared with 1.4 percent growth in December 2017.

On the stock market general had its worst year since 2008 in 2018, dropping 27 percent compared with 12 percent for the FTSE 100.

Tesco, Britain biggest retailer, showed its resilience after its own-brand basic ranges combined with premium offerings to fend off rivals at the top and bottom of the market, and keep its tills ringing.

"There is no shortage of gloomy within the UK sector, but there are winners and we believe is one of them," said Alasdair McKinnon, the of the Scottish Investment Trust, a investor.

Tesco's performance stood in contrast to rivals and which both missed sales forecasts this week, hit by competition from German discounters and

"The shopper is behaving as he or she always has," Tesco said.

"They're savvy, they know what good value is, they appreciate good service and while for sure there's definitely a challenging environment out there, our job is to keep focused on how we can serve them better whatever the circumstances."

Sophie Lund-Yates, at Hargreaves Lansdown, said Tesco, with a 28 percent share of the market, held its own, even as competition increased. "These are promising results from Tesco, but time will tell if it has enough puff left to keep outrunning its rivals," she said.

Many of the retailers, including Tesco, said they were also working to prepare their operations in case Britain leaves the world's biggest trading bloc on March 29 without a deal, shattering supply chains and damaging

With so much uncertainty, the tone was bleak.

"What we cannot see at the moment is any positive sentiment," boss said. "And therefore what we are planning for at the moment is the same sentiment running through the entire year." ($1 = 0.7852 pounds)

(Writing by Kate Holton; additional reporting by James Davey, Costas Pitas, Simon Jessop, Josephine Mason and David Milliken in London, and in Bengaluru; editing by Keith Weir)

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

First Published: Thu, January 10 2019. 18:08 IST
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