Scott Reid: High street fashions some sort of recovery

Much of the good news yesterday came courtesy of fashion chain Next and B&Q's owner Kingfisher. Two household names, and two businesses that have been directly in the firing line of the recession.

Next has felt the pinch as cash-strapped fashionista discover the discounted delights of Primark, H&M and the like, while Kingfisher has had its wings clipped by the housing market slump.

Investors will therefore have been heartened by news of a recovery at both businesses.

Next unwrapped an 18 per cent hike in annual profits after seeing a turnaround in sales following four years of declines.

B&Q's parent, meanwhile, hailed a near 50 per cent leap in its full-year earnings aided by a solid outcome at its UK DIY business.

The positive news flow continued yesterday at Clinton Cards, which flagged up better than expected annual profits after a "very encouraging" first half.

Ted Baker, the international fashion house that started out as a Glasgow shirt shop, was similarly ebullient. Annual profits were nearly 10 per cent higher and the talk was of a strong start to the new financial year.

As if the picture couldn't get any brighter, official figures showed UK retail sales volumes had jumped 2.1 per cent in February – a much higher reading than most commentators had been expecting and, in value terms, the sharpest rise since the not-so-glorious summer of 2008.

Yet countering the euphoria was a string of caveats and warnings familiar to anyone with a passing interest in the fortunes of the nation's shopkeepers.

"These figures may not be all they seem," noted British Retail Consortium boss Stephen Robertson, referring to the surprise data from the Office for National Statistics.

The growth, he argued, compared with "very weak" figures a year ago, while last month's performance was boosted by sales postponed from January.

It's a valid point. Britain was locked firmly in the jaws of recession at the start of 2009, with many of us buying no more than the bare essentials. Comparatives between then and now were always going to flatter.

Then there's the small matter of an impending general election to thwart any high street recovery.

As the economy crawls out of recession, many retailers fear the outlook for consumer spending could worsen amid uncertainty over the prospect of higher taxes and public-sector job cuts.

Despite those fashionable full-year numbers, Next added its name to a growing list of retailers to express concerns over the outlook.

Chief executive Simon Wolfson said the group was "extremely cautious" about consumer spending – a sentiment that was echoed by both Kingfisher and Clinton Cards.

Just a day earlier, Sainsbury's boss Justin King warned of a "challenging" 2010 after the supermarket giant posted its smallest rise in underlying quarterly sales in almost five years.

On Tuesday, the CBI's regular poll of retailers showed high-street sales growth had lost momentum in the first half of March, amid lingering caution among consumers.

The same day also saw a profit warning from Carpetright, Britain's biggest floor coverings retailer.

So, the usual pattern of winners and losers is emerging from the results season. Clearly, the collapse of many retailers in the recession has given a boost to those that survived. In many cases, too, profits will have been bolstered by rigorous cost cutting.

With job worries, tax increases and uncertainty over the fallout from the forthcoming election preying on consumer sentiment, a wider high street recovery would appear to be on hold.

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