Retail on the ropes

Retail sales were floored last week as global financial turmoil prompted already fearful consumers to rein in their spending dramatically.

Sales began to slide steeply just over a fortnight ago in the wake of Lehman Brothers’ collapse and the HBOS crisis and by the end of last week they had “fallen off a cliff”.

Additional pressure was highlighted this week by retail collapses, job losses and appeals to landlords to ease rent conditions as payment day came around.

Almost every retail sector was hit hard by last week’s sales disaster. Most non-food retailers’ like-for-likes are understood to have suffered a mid-teens fall, while others’ – especially big-ticket retailers – plunged by between 20 and 50 per cent. Unusually mild weather delivered an additional blow to fashion.

One leading industry figure said: “Last week’s numbers were very poor – absolutely awful. It’s a whole different environment.”

The chief executive of one specialist retailer said there had “absolutely” been a fall-off in trade as the financial crises unfolded. “There is no confidence,” he said. A fashion group director said: “The bottom fell out of the market.”

Even those retailers that outperformed warned of a troubled outlook. As he posted record interims, Game chairman Peter Lewis said: “We recognise the extraordinarly challenging and uncertain market conditions in which we are operating today and we cannot be immune to wider economic uncertainties.”

Dune chairman Daniel Rubin said: “I have never seen it so tough. This is exceptional.”

Torrid trading claimed more scalps when 28-store fashion retailer Joy fell into administration and clothing brand Miss Sixty went the same way on Wednesday. Fashion firm Hardy Amies was teetering on the brink. At Rosebys, which hit the buffers last week, 30 head office staff have been made redundant.

MFI’s new owners, led by chief executive Gary Favell, were battling to reshape the business as Retail Week went to press. The retailer wants a three-month rent holiday, but is likely to shut approximately 100 shops anyway.

After Monday’s rent day, one leading landlord told Retail Week that six well-known retailers had asked to pay on a monthly basis. House of Fraser and All Saints are thought to be among them.

Some store chiefs warned that retailers should not allow the tough climate to distract them. Tesco chief executive Sir Terry Leahy said: “It’s not as bad as it was in 1991/92, when interest rates were 15 per cent and there was higher unemployment. It’s not helpful to speculate on how bad it could get, but it’s important to trade what’s in front of you.”

But City analysts remained downbeat. Broker Landsbanki warned: “The fact that we are still only in the early stages of the consumer downsizing suggests there is scope for some real earnings shocks. The rest of the year is likely to witness a large number of large-scale profit warnings.”