THE latest positive trading updates from Superdry brand owner SuperGroup and luxury goods retailer Burberry offer yet more confirmation that a swathe of the high street has had a pretty decent Christmas.
Yes, some of the sector’s earnings have been lumpier than for some years due to the Black Friday digital-buying phenomenon imported from the United States impacting bricks-and-mortar sales later in the festive period.
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And there have been obvious disappointments, including the 5.8 per cent fall in like-for-like sales at Marks & Spencer’s general merchandise arm, the continuing revenue falls at the leading supermarket groups, and individual upsets such as the profits warning from Game Digital and a lacklustre statement from Majestic Wine.
But the more general experience has been one of resilient mid-to-high single-digit sales advances. That has included department stores such as John Lewis, House of Fraser and Debenhams, clothing operators such as Next and Asos, homewares companies like Dunelm and Shop Direct, and, with AO World, domestic appliances.
SuperGroup yesterday posted same-floorspace sales up 12.4 per cent in the 11 weeks to 10 January, suggesting it may have turned the corner after a series of profit warnings that jolted the market in the light of that retailer’s previous exponential sales growth.
Burberry managed to shrug off a difficult Asian market to still show like-for-like sales up 8 per cent.
It may be premature to say that, taken altogether, it shows consumers have got their mojo back. But, with inflation and interest rates at record lows, and real wage growth now making its presence felt, retail conditions seem more propitious than for quite some time.
Where retailers have obvious problems they seem to be sector-specific, such as the systemic changes in supermarket shopping, or company-specific, such as at M&S.
If a firm is not in a sub-sector in thrall to systemic change, and has got its basic offer right – the likes of John Lewis, Next and Primark spring to mind – there does seem a generally favourable trading backcloth now.
Premier cuts spending as oil price slumps
NORTH Sea and international energy explorer Premier Oil has traditionally had strong cash-flows. As the company said in its trading update yesterday, this is backed up by an advantageous tax position in the UK and a favourable debt structure.
So when Premier says it expects to book a $300 million (£200m) writedown on some of its assets in the second half of 2015 due to weak oil prices, and also expects to spend about $600m – or 40 per cent – less on planned development this year, you know those warning about the impact of the slump in energy prices are not just jeremiahs.
A price below $50 a barrel makes a lot of exploration work unfeasible, the arithmetic doesn’t stack up. We are obviously going to see a lot more cherry-picking of projects to invest in by the oil and gas industry while the current trend of low prices goes on.
Companies like Premier will make hard-headed decisions on what assets to keep, what to sell, and exactly where to focus money and concentration.
Opec is making noises about still believing the medium- to long-term price of oil will be about $100, but one can’t help but wonder they would say that, wouldn’t they?
The truth is oil prices have always been volatile, so it will be some time before we know whether what we are seeing is a continuation of that or we are seeing more systemic factors – such as fracking in the US – in play.
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