Some of retail’s biggest names have updated on their performance, giving an insight into their outlook on shopper trends, the high street and the economy.

Health check

The last 10 days have provided a much-anticipated opportunity to gauge the health of the retail industry.

On ‘super Thursday’ alone Next, Morrisons, Argos and Homebase owner Home Retail, Dunelm and Ocado all reported to the City while John Lewis Partnership also issued its interims. That followed hard on the heels of results from B&Q owner Kingfisher and Thorntons the previous day.

The numbers were pored over for a read of the impact of the summer’s good weather, the state of consumer confidence and changing shopping habits.

The trading picture was largely positive. Next recorded an 8.2% rise in first-half pre-tax profits as it reduced markdowns while Argos and Homebase notched up a rise in like-for-likes helped by warm weather but backed by operational readiness.

John Lewis Partnership reported a 7.5% rise in first-half sales as online, electricals and the rapid growth of grocer Waitrose spurred performance.

Dunelm had strong profits and an increase in market share, Kingfisher said UK trading was strong and Thorntons reassured that its turnaround was making life sweeter.

However, retailers tackling long-term operational issues continued to struggle. Morrisons reported a 1.6% fall in first-half like-for-likes, in part because of its lack of exposure to the growing convenience and online channel. And on Monday, French Connection said a reduction in its wholesale business had led to a first-half sales fall.

Retailers are dreaming of a mobile Christmas

John Lewis managing director Andy Street will be hanging out his stocking in anticipation of a “mobile Christmas”. The department store business reported that more than 40% of its web traffic now comes through mobile phones or tablets. The increase follows investment in a web platform that went live in the first half.

Street said: “Purchasing from desktop is moving to mobile. In July we relaunched our transactional mobile app and since then sales via the app have grown quickly and we are preparing for what we anticipate will be the UK’s first ‘mobile Christmas’.”

Asda agreed technology would be key this Christmas when it unveiled its latest Income Tracker findings. The grocer expects 75% of its customers to shop across bricks and clicks this Christmas, signalling a dramatic shift towards multichannel for the crucial Christmas food shop. The figure compares with 57% over Christmas 2012 and 29% over the festive period in 2011.

Mobile is a key element as Asda targets busy mothers shopping on smartphones and tablets at the school gate and on their commute.

Home Retail-owned Argos reported that online sales now account for 44% of total revenues.

The growth was supported by strong mobile commerce sales - up by 133% to account for 17% of total Argos sales compared with 7% for the same period last year.

Argos said that the boost was driven by the ongoing development of its mobile and tablet apps and momentum is expected to continue.

We’re not in recovery mode just yet

Despite positive signs on the economy in the past few months sparking talk of a recovery, retailers remain cautious.

Morrisons chief executive Dalton Philips said life remains hard for the consumer. “The recent uptick in spending is somewhat based on the warmer weather. We are still seeing customers dipping into savings or increasing borrowing.

For the majority of consumers food inflation is above wage increases,” he said.

Next boss Lord Wolfson said that although things have stopped getting worse, they are not getting any better.

“For the consumer, the credit squeeze is over. That’s good news as one of the drags on sales has disappeared, however, it is not the same thing as a recovery,” he said. “We won’t see any real recovery in retail sales until we see real earnings growth and that looks like it’s at least a year off.”

While Wolfson said that the easing of the credit market had resulted in some improvement to retail sales he also warned that a credit-led recovery would be “unsustainable”.

Ian Cheshire, boss of B&Q owner Kingfisher, agreed it was too early to call an economic recovery in the UK, but he was encouraged by recent data pointing to an upturn.

He said: “It’s looking a lot more positive”, adding that unemployment is decreasing and people feel happier when their house prices are rising.

The dynamics of the space race have changed

If Tesco boss Philip Clarke pulled the handbrake on the market leader’s race for out-of-town space last year, Morrisons boss Dalton Philips put the metaphorical car on bricks last week.

Morrisons has slashed its planned capital expenditure from £1.2bn this financial year to £850m next.

The grocer has identified that it can reach the same potential customer base through fewer new big stores and a robust convenience and online offer. Morrisons is playing catch-up in the latter two channels and emphasis put on the importance of its M Local convenience arm - which will hit 200 stores next year - evidences the new space race is in the channel. Philips said Morrisons is not finding it difficult to find locations for M Locals.

But if Morrisons has its eyes firmly on towns, those with out-of-town store estates are still puzzling over the conundrum of what to do with them. Tesco has taken action in its largest stores to use space lost to online sales for cafe Harris + Hoole and restaurant Giraffe to make more of an ‘experience’ of shopping there.

B&Q owner Kingfisher may also invest in complementary businesses to fill the bigger shops in its 360-store portfolio.

Kingfisher chief executive Ian Cheshire said: “We might do something more radical and take smaller businesses that need space and bring them into the business.”

Cheshire believes B&Q could maintain the same sales with 20% less space.

Weather is not for wimps

Former Marks & Spencer boss Sir Stuart Rose’s famous proclamation that “weather is for wimps” didn’t quite ring true as retailers benefited and suffered alike from the changeable weather.

Sales at Next were “particularly strong” in July when the weather became warmer. However, during August, when the retailer had sold out of summer stock and introduced autumn ranges, the continuing hot weather worked against it.

Chief executive Lord Wolfson said the weather was an additional contributor to volatility in shopping habits.

“What we’ve seen in the past three years is increasing volatility in customers buying closer and closer to the point at which they need clothes,” he said.

Sales at Argos and Homebase rose with the mercury as sunny summer weather stoked demand for seasonal lines.

Argos reported sales of paddling pools rocketed 70% and more desk fans sold in a fortnight than during the whole of 2012.

Homebase delivered its best like-for-like performance in more than a decade - up 11% - as consumers splashed out on seasonal lines.

Home Retail boss Terry Duddy acknowledged that the summer had brought big benefits, but that Argos and Homebase were well prepared to take advantage of demand. “It takes a lot of good operational execution to deliver those results,” he said.

Kingfisher boss Ian Cheshire said: “It was a tale of two quarters, with the coldest weather for 50 years in March and a heat wave in July.” The retailer reported sales of outdoor seasonal products were down 11% in the first quarter and up 17% in the second.

There’s a divide over the North/South divide

Retailers are at odds over whether consumer sentiment in the North is more depressed than in the South.

At an event in London’s City Hall to mark the fifth anniversary of Asda’s Income Tracker last week, chief executive Andy Clarke observed: “It’s nice to see some cranes in the sky. That is not the case around the country.

“We are seeing some green shoots but we have to be careful to recognise the difference between London and the rest of the UK. The Northeast or Northern Ireland is very different.”

Asda forecasts that, while average spending power is expected to rise 3.3% in the next five years in London, it will fall 3.3% in Wales and 2% in the Southwest over the same period. Spending in the Northwest is expected to edge up 0.6%.

Morrisons chief executive Dalton Philips echoed his rival’s sentiment: “There are parts of the UK, London in particular, that are seeing growth at higher levels than the rest of the country.”

However, John Lewis managing director Andy Street disagreed.

“A lot of people are saying it’s just a recovery in the Southeast. That’s not my view,” he said. “Our numbers show we are seeing growth in Liverpool, Glasgow, Nottingham and Solihull. There’s various evidence it’s not just
the Southeast.”

Mark Price, managing director Waitrose, which enjoyed a 6.9% increase in first-half like-for-likes, pointed out: “We are performing really strongly in the North. These are not southern driven results.”

Debate over high street revival rolls on

How to revive failing high streets remained on the agenda for retailers, in the wake of the Grimsey Review’s publication earlier this month.

Next boss Lord Wolfson believes that improved road access and cheap parking are key and branded other initiatives as pointless gimmicks.

Wolfson said: “You can look across Britain and see city centres that are absolutely booming. Look at Manchester, Leeds city centre and smaller towns like Bury. There is no reason why city centres shouldn’t thrive.

“They need four things. They need good, quick access by car. They need cheap parking. They need a dense pitch of shops, preferably with some sort of canopy so people don’t get wet, and some sort of pedestrianisation so people don’t get run over. They also need units that are large enough to take the sort of ranges retailers have these days, which is significantly bigger than in the 1960s and 1970s.

“If you can deliver all these things, you can have a thriving town centre.”

The housing market hangs in the balance

The housing market jumped backed to life this summer as mortgage lending improved and house prices rose on the back of the Government’s Help to Buy scheme.

Housing transactions have risen year on year since April according to the HM Treasury Databank, increasing more than 16% in July.

Kingfisher boss Ian Cheshire said he has yet to see an associated uplift in sales but expects it to come through in the next six to nine months.

However, Next boss Lord Wolfson warned that although the housing market revival would provide a short-term benefit it was likely to cause a “house price bubble” that would be a drag on the economy when interest rates go up.

He cautioned that house price inflation “is as dangerous as any other type of inflation”.

Wolfson said: “The housing market could go one of two ways. If the increase in transactions leads to house building that would be fantastic and means there are long-term growth prospects for home furnishing businesses. If it’s just house price inflation, at some point there’s going to be an accident.”