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Wednesday 05th of August 2009
September 26, 2008

Retailers warn of bleak outlook

by Kay Murchie

A number of High Street retailers are warning of a gloomy outlook as the economy comes under increased pressure.

JJB Sports, one of the High Street’s well-known retailers, lost almost half of its market value after reporting a deficit before exceptional items of £9.7 million for the six months to the end of July7, compared with profits of £8.3 million the previous year.

The sports chain has scrapped its dividend to shareholders and has already laid off 800 people by closing 27 loss-making stores.

The company said it remains cautious about the outlook for retail given the background of a weakening consumer economy.

There are concerns that some retailers could be on the brink of collapse as the chaos on Wall Street is having repercussions throughout the world.

There is uncertainty surrounding the $700 billion (£380 billion) US financial bailout plan sending stockmarkets into turmoil.

Meanwhile, today Washington Mutual (WaMu) has been closed making it the largest failure of a US bank. WaMu’s assets have been sold to banking giant, JPMorgan Chase, for $1.9bn (£1 billion).

In addition, John Lewis has experienced a sharp fall in sales since the onset of the chaos last week when Wall Street giant Lehman Brothers collapsed and Lloyds TSB announced it was to acquire HBOS.

John Lewis, which owns the Waitrose supermarket chain as well as the renowned employee-owned department stores, said sales fell 5.6% to £47.34 million across its 27 department stores and online operation, while sales at Waitrose have slowed significantly.

Meanwhile, furniture chain MFI is in talks with its landlords ahead of its quarterly rent bill, just days after seeking emergency funding. It is understood that the chain is negotiations over a management buyout.

Rosebys, the furnishings and curtain chain, has been placed into administration, putting 2,000 jobs at risk.

Furthermore, the City is preparing itself for a trading update from Marks & Spencer next week

The news follows that from HSBC today who announced 1,100 job losses, of which 500 are in the UK. Yesterday, Bradford & Bingley, which is the UK’s biggest buy-to-let lender, announced its mortgage processing centre in Borehamwood, Hertfordshire, is be closed with the loss of 370 jobs.

Earlier this week, figures from the CBI revealed another poor month after retail sales fell for the sixth consecutive month in September.

The CBI discovered that approximately one-fifth of retailers experienced rising sales this month while 48% said they were down compared with last year.

The CBI’s figures continue to highlight that consumers are avoiding the High Street as they are worried about the economy, falling house prices, rising food and fuel bills, the threat of a recession and losing their jobs.

John Cridland, the CBI’s deputy director general said, the retail outlook for early autumn remains bleak as consumers are feeling the brunt of the economic slowdown as the UK endures what is likely to be a short and mild recession.

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