THE outlook for the high street remains "far from sunny", the CBI warned yesterday, as the business group's latest industry snapshot showed retail sales falling for the sixth month in a row.
A balance of 27 per cent of firms reported weaker sales volumes than a year ago. The reading was better than the 42 per cent expected, and a marked improvement on August's 46 per cent outcome – the worst in the survey's 25-year history.
However, r
etailers were more gloomy about the outlook for next month, with 30 per cent of those polled expecting sales to worsen again in October.
David Lonsdale, assistant director of CBI Scotland, said: "Shoppers are feeling the pinch from higher fuel and food prices, and are having to cut their cloth accordingly.
"The outlook for the immediate future is far from sunny and the weakness in consumer confidence suggests Scottish households will continue to watch the purse strings."
The CBI's distributive trades survey follows similarly downbeat reports from both the Scottish and British retail consortiums.
However, official data last week suggested shoppers had defied the credit crunch last month, snapping up clothes and footwear and pushing high street sales sharply higher.
The Office for National Statistics (ONS) said UK retail sales volumes were 1.2 per cent higher in August than July – in sharp contrast with forecasts for a drop of 0.4 per cent. That left sales in August standing 3.3 per cent higher than a year earlier. However, analysts have cast some doubt on the ONS figures.
Commenting on the CBI survey, which was conducted between 28 August and 17 September, Global Insight economist Howard Archer said: "Despite the improvement compared to August, the survey does not fundamentally dilute belief that the economy is headed for recession.
"We believe there is a growing case for interest rates to be cut sooner rather than later, particularly given the risk that the heightened financial sector turmoil could have a serious knock-on effect on the rest of the economy."
The CBI found that retail sectors linked to the troubled housing market continued to suffer, with 62 per cent of furniture retailers and 84 per cent of household goods suppliers reporting worse sales.
Supermarkets were a bright spot, though, with a balance of 37 per cent of grocers reporting sales growth.
Andy Clarke, chairman of the CBI Distributive Trades Panel and retail director of Asda, said: "Shoppers are increasingly focusing on price as the economy continues to slow and household budgets get tighter.
"Supermarkets have fared much better in these difficult times, particularly those that have realigned their range to match the price conscious."
Co-op bucks the trendMUTUAL retailer Co-operative Group said it was ready to trade blows with its bigger grocery rivals after its burgeoning food business boosted first-half profits.
The retailer has embarked on a three-year brand and store overhaul and will consolidate its position as the country's fifth-biggest grocer if its £1.6 billion Somerfield takeover is given the nod.
The Co-op's food business boosted trading profits by 68 per cent to £126 million in the 28 weeks to 26 July, helping the mutual lift overall profits by 36 per cent to £191.2m.
Like-for-like food sales were 5 per cent higher – ahead of the market – with overall sales leaping 43 per cent to £2.4bn as customers flocked to revamped stores. The Co-op has seen 11 successive quarters of like- for-like growth and the Somerfield deal would give it an 8 per cent share of the grocery market.
Chief executive Peter Marks expects to get "back into the premiership" with the move and said the Co-op's overhaul would not be derailed by tougher trading conditions over the next year.
He said: "The credit crunch, the ongoing slow-down in the housing market, food price inflation and energy cost rises will weigh on all businesses – and our sector will continue to be as competitive as ever.
Topps bottoms outTHE UK's biggest tile and wood floor retailer Topps Tiles has unveiled sharp sales falls but said it had shored up its finances to weather the tough conditions.
The firm's like-for-like sales have slumped 13.1 per cent in the past eight weeks amid the housing market downturn. It expects a 5 per cent decline over the year to 27 September.
But shares closed virtually unchanged after Topps said lenders had agreed to relax banking covenants on its debts, which stood at £94.7 million in May, and extended its current loan facility until 2012.
Despite the recent sales declines Topps also assured investors that full-year operating profits would be within City estimates of £36m to £39m. Chief executive Matt Williams said the group, which has 342 stores, had put in a "credible" performance in the conditions.
He said: "Whilst we do not expect there to be any short term change to these trading conditions, we continue to have strong foundations and a sound business model which will see the business through this particular phase of the economic cycle."
Topps has paid an arrangement fee of £500,000 to secure its new loan facility, but has also made £700,000 on the £4m sale of four freehold properties.
Clothing growth offsets slump in furniture salesLAURA Ashley reported higher half-year earnings yesterday as increased clothing sales offset a slump in demand for furniture and decorating products.
Underlying pre-tax profits for the 26 weeks to 26 July rose 13 per cent to £4.5 million as group sales climbed 5.5 per cent to £120.2m.
Like-for-like UK fashion sales were up 6.7 per cent but same-store sales of furniture dived 13.2 per cent and the firm said it saw little sign of UK retail improvement.
Store openings boosted the half-year sales performance, with 20 new outlets increasing UK selling space by 11 per cent to 835,000sq ft. The UK portfolio comprised 225 stores at the end of July, with half of the sites being mixed-product stores, 69 focused on home furnishings and another 32 being concessions.
Home accessories accounted for 28 per cent of sales in the half year, with furniture generating 26 per cent, decorating 24 per cent and fashion 22 per cent – up from 19 per cent a year earlier.
The company said knitwear ranges achieved a third successive season of significant growth, while dresses also performed successfully.
It added that gross margins increased by one percentage point in the first half of the year, reflecting better sourcing and product changes.
Operating expenses rose by 7.9 per cent to £53.2m, as a result of the new store openings over the year.
Nick Coulter, an analyst at the retailer's house broker Numis, said: "In terms of the half year, the numbers were very much in line, with a decent performance in fashion."
Bay in the dock…SHARES in Bay Trading womenswear firm Alexon slumped by a fifth yesterday as the retail group painted a grim picture of high street trading.
Bay Trading – aimed at 18 to 25-year-olds – saw like-for-like sales fall 12.5 per cent in the eight weeks since July.
Same-store sales of its other brands – which include Minuet, Kaliko, Ann Harvey and Dash – were down 3.3 per cent in the "challenging" trading environment.
Alexon's gloomy snapshot came alongside a 41 per cent fall in pre-tax profits to £5.5 million in the six months to 26 July.
The group also slashed its interim dividend by two-thirds and added that its full-year performance would hinge on Christmas trading.
Numis Securities analyst Andrew Wade said: "Looking ahead, Alexon is in a very challenging space, the brands being squeezed by the department stores and Bay Trading suffering in an increasingly difficult middle market."
New chief executive Jane McNally said the group was "underperforming its potential" despite the challenging market.
Since joining Alexon three months ago, she has drafted in Jane Eskriett – previously womenswear director at New Look and Primark – to carve out a new niche for the brand.
