Market watchers poised for further high street gloom

WEAK high street spending figures for September are this week expected to add to the gathering gloom on the high street as a raft of retailers report figures.

The British Retail Consortium’s retail sales data for September is likely to show no improvement on August’s fall with consumers expected to have been particularly reluctant to splash out on big-ticket items.

Economist Howard Archer, at IHS Global Insight, said consumers were likely to remain “very cautious” in their spending over the coming months due to high inflation, muted wage growth and tighter fiscal policy.

“A sharp jump in utility charges in August is adding to the squeeze on many consumers, unemployment is rising and the jobs outlook is looking increasingly worrisome,” he said.

The BRC’s August survey had shown that like-for-like sales in August fell by 0.6 per cent compared to last year.

“It is very possible that sales were at least as soft in September,” warned Archer.

A second quarter update from online clothing firm ASOS, which has been one of the market’s most dramatic success stories of recent years, will be closely watched on Friday.

Analysts at Singer expect a slowdown in domestic sales growth but predict the picture from its international operations to be rosier. It expects that the rising overseas contribution will have reduced domestic sales to about 40 per cent of total turnover in the second quarter from over 60 per cent in the first half of last year.

International growth is also expected to help luxury clothes and accessories group Burberry deliver strong figures in a trading update on Wednesday covering sales in the half year to September.

WH Smith, which reports full-year figures on Thursday, is expected to reveal a decline in like-for-like sales over the year but the chain, which has more than 1,000 stores across the UK, is tipped to meet market expectations for profits of about £93m, compared to £89m last year.

In August the company said both the travel business, which operates from more than 530 outlets at airports, train stations and motorway service areas, and the high street retail arm were delivering good performances.

Chief executive Kate Swann has focused the group on higher margin products and identified core areas such as news, magazines, books and stationery. The plan has involved weeding out lower margin areas, such as CDs, which has had the effect of cutting sales but boosting profits.

Like-for-like revenues are expected to fall by 2 per cent in travel and by 4 per cent at the high street chain, because of the strategy, but analysts hope this time it will also include some detail on future growth plans, especially an expansion of the travel arm overseas.

Jonathan Pritchard, an analyst at Oriel Securities, said WH Smith may add 250 to 300 stores outside the UK over the next three to five years, against 47 currently, with overseas railway stations, airports, hospitals and shopping malls being explored for possible locations.

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