This week’s profit warning from Carpetright should be taken seriously as an indication that no one can bank on a rapid, unbroken recovery.
It’s been a while since the phrase ‘profit warning’ has featured in a Retail Week headline. It shows how most quoted retailers have managed their way skilfully through the choppy waters of the past two years, and how adept they’ve become at managing City expectations.
Most significantly, though, it reflects that throughout the recession, consumers have surprised everyone by continuing to spend more than by rights they should have. So this week’s profit warning from Carpetright - one of the best-run quoted retailers there is, and one that dominates its sector - should be taken seriously as an indication that no one can bank on a rapid, unbroken recovery.
Chairman Lord Harris said that the bounceback in trading after January’s awful weather hasn’t been as great as expected, and trading has failed to return to pre-Christmas levels. We shouldn’t have been surprised. Just three weeks ago at the Retail Week Conference, a bearish Harris - who last year had been one of the more optimistic retail chiefs about the prospects for recovery - warned that 2010 will be tougher than 2009.
And there’s the thing. Retail got lucky in the second half of 2009, as many consumers’ wallets bulged with the proceeds of rock-bottom interest rates. It won’t stay that way for long, with post-election tax rises, rising unemployment and at some point higher interest rates on the cards.
Retailers that sell big-ticket items like Carpetright feel consumers’ jitters before others, and what this week’s profit warning shows is that while people might not be thinking too hard about small purchases, they are definitely thinking about the big ones. It’s a reminder that while no retail business wants a double-dip recession, everyone needs to prepare for one.
Sparks to fly in electricals
John Browett has really stepped on the gas with his transformation of DSGi, and is getting results. By bringing Currys and PC World together in more locations, and creating bigger stores with a transformed environment,
he is making sure that Best Buy will get a real run for its money when it finally opens its doors.
It’s going to be one hell of a battle. Arguably, given the high penetration of the internet in the category, there is already too much capacity in UK electricals retailing. With Best Buy coming too, the fight for customers’ spending is going to be bloody. Great news for shoppers, but in the long term, DSGi, Best Buy and Comet can’t all prosper.