Bellwether retailers Carpetright and Next spooked the City on Tuesday with cautious updates presaging punishing times for the stores sector.
But the chief executives of each insisted that trading prospects are not irredeemably bleak.
Following a first half when there was “a noticeable cooling in retail demand in recent months”, Next chief executive Simon Wolfson said that looming public spending cuts and the VAT rise were likely to affect consumers. And in the spring, Next’s selling prices are likely to rise by between 5% and 8% because of factors including higher cotton prices.
Despite highlighting such issues, Wolfson maintained: “We’re not talking about demand falling off a cliff.”
He said it was difficult to convey the subtleties of trading because of a “disaster or euphoria” media mindset and characterised conditions as “sluggish”.
But he reassured: “I’m very confident we’re gaining a lot of market share in the UK. We’re in for a difficult time but I’m more encouraged now than I was three months ago.”
Oriel analyst Jonathan Pritchard said the updates prompted a retail sector stock market “wobble” but thought the reaction “overdone”.
Pritchard said: “We can understand why the sector’s share prices have come under pressure but we would urge investors not to get carried away with the perennially bearish Next management team’s words.
“We do not expect public sector job cuts to be draconian and the consumer won’t stay underground for anywhere near as long as share prices are currently discounting.”
Next reported a 3.1% rise in total brand sales in the half to July 31. Retail like-for-likes excluding Direct fell 1.5% but Directory sales surged 7.8%.
In the second half Next expects total sales growth to be flat to 3%, a retail like-for-like decline of between 1.5% and 4.5% and Directory sales up between 4% and 8%.
Carpetright posted a 2.5% decline in group sales in the 13 weeks to July 31, when UK and Ireland like-for-likes dropped 3.4%.
Harris said that this year the retailer would not have to contend with rampant discounting by rival Allied Carpets, which closed most of its stores last year.
He said Carpetright would benefit from a growing internet arm and the VAT rise in January could pull forward sales.
In the medium-term, the 536-store retailer aims to make property savings as it renegotiates swathes of its estate as 25-year leases begin to come up for renewal in three years.