Analysts remain cautious for short term
The past six months have been 'overwhelmingly positive' for retailers quoted on the London Stock Exchange, although this may be unsustainable, analysts have warned.

This was the message from business adviser Grant Thornton after it reviewed all trading updates issued by quoted retailers in the third quarter of the year.

The company said that 41 per cent of trading statements had been positive; 44 per cent had been neutral and just 15 per cent had been negative in the three months from July 1 to September 30.

It added that this was 'almost identical' to results of the study in the previous quarter, although they were much healthier than results for the corresponding period last year, when only 22 per cent of retailers issued positive trading statements and 20 per cent were negative.

Grant Thornton head of retail services David Bush said: 'The majority of retailers have increased their gross margins during 2005 by cutting costs and improving their supply chain efficiency.'

He added: 'Generally, these actions have a one-off benefit and cannot be effectively repeated in the short term. Retailers are now challenged with searching for other ways to improve their profits, but this will not be easy to achieve through increasing sales - especially if a hotly tipped rise in interest rates materialises in November.'

The success of John Lewis and Next was also highlighted as pointers to the potential for sales increases through the internet and mail order.

In a similar vein, analyst Goldman Sachs has downgraded its forecast for the general retail sector from neutral to cautious.

In a statement, the company said its own indicators pointed to a slowdown later this year in sales of non-food items, as well as rising interest rates and increasing cost pressures on retailers.