Store stocks overall suffered their sharpest fall in six years at the end of last week, as electricals giant DSGi slashed profit forecasts after disastrous Christmas trading and Land of Leather revealed its key January Sale had failed to meet hopes.
On Monday, retailers’ value slid by 3 per cent on the back of talk that Sainsbury’s and Marks & Spencer’s seasonal performance would disappoint. The gloom thickened on Tuesday as data showed the industry had suffered its worst Christmas in three years.
Like-for-like growth of just 0.3 per cent in December was the worst Christmas figure since 2004, the BRC-KPMG Retail Sales Monitor revealed. Growth for the month was the weakest since March 2006.
Brokers continued to adopt a bearish stance on retailers, but there was also relief that the figure was not worse.
KBC Peel Hunt analyst Robert Brent said: “Although it has not been great, the worst in three years is better than the prediction of worst in 10 to 20 years that was being bandied about before the period.
“The BRC still reports the value of total sales increased by 2.3 per cent – hardly a disaster.”
He warned, however, that the rest of 2008 – especially the first half – would be “extremely challenging”.
Panmure Gordon’s Philip Dorgan described the BRC data as “slightly disappointing”, but believed retailers should not be written off because of the bad news of the past few days.
He said: “Early indications of Christmas trading are often the worst, in that retailers are forced to bring profit warnings out and, as we go through the reporting season, better numbers often emerge.”
However, Citi feared the retail downturn still has some way to go, based on historical analysis of BRC numbers in the difficult 2005 period. “This suggests we are probably only halfway down this cycle of retail sales weakening,” the broker noted.
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