UK stores gloomy due to poor trading

Further signs of gloom on the UK high street emerged today with a report showing the number of retailers reporting downbeat trading hit its highest level in two years in the last three months of 2007.

Further signs of gloom on the UK high street emerged today with a report showing the number of retailers reporting downbeat trading hit its highest level in two years in the last three months of 2007.

A study by business adviser Grant Thornton revealed that stock market-listed stores are facing increasingly tough conditions as shoppers tighten their belts.

The firm’s Quoted Retail Companies Index found that 22% of retailers posted negative trading updates in the three months to the end of December, up from 15% in the third quarter of last year and the highest total since the start of 2006.

David Bush, head of Grant Thornton’s retail services team, said: “Despite December’s reduction in interest rates, consumer confidence appeared to fall significantly during the final quarter of 2007, resulting in the highest number of negative trading statements issued in two years.

“However, it remains to be seen whether the subsequent well-publicised post-Christmas sales frenzy will have been enough to fully offset the slow start to Christmas trading and a sluggish quarter overall.”

The study also revealed that the number of retailers issuing profit warnings in the period rose to five – the highest for a fourth quarter in three years.

All five profit warnings came from the non-food sector with the majority from the fashion sector, including Sports Direct International, French Connection, Moss Bros and Bay Trading owner Alexon.

Mr Bush said fashion retailers and firms selling higher-priced goods such as furniture were the hardest hit as consumer confidence weakens.

“While the number of profit warnings has not increased significantly, the number of retailers who urged caution for the year ahead was plainly obvious for all to see,” he said.

The report found that for five quarters in a row, 100% of food and drink retailers have seen an increase in like-for-like sales.

The figure compares with just 55% enjoying rising like-for-like sales in the non-food sector, down from 83% in the previous three months.

Grant Thornton’s report comes after the initial updates on festive trading from retailers indicated mixed trading on the high street.

Currys and PC World owner DSG International shocked the market yesterday as it announced a profit warning due to weak trading in the UK, Italy and Spain.

Meanwhile, fashion chain Next disappointed investors as it said it did not expect its UK stores to return to like-for-like sales growth this year.

But video games retailer Game Group provided some optimism as it said strong Christmas trading would see it beat annual profit targets.

Trading updates from Marks & Spencer, Sainsbury’s, Greggs, H Samuel jeweller Signet and Frankie & Benny’s owner Restaurant Group are due next week.

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