Woolworths yesterday heightened fears that retailers could be heading for their worst Christmas trading period in 25 years.
In an unscheduled trading update, the group said sales and footfall for October and November were down on previous years, with competitive prices in the DVD sector hitting it hard.
The gloomy update from Woolies, which is expected to leave annual profits short of hopes, came as November’s sales monitor from KPMG and the British Retail Consortium (BRC) showed the slowest rate of growth since March.
Clothing and footwear sales were most under pressure, although the BRC study pointed out there was still time for Christmas sales to strengthen.
But the BRC figures strengthened comments made last week by leading retail analyst Richard Ratner, who is vice-chairman of Seymour Pierce stockbrokers. He warned recent trading suggested the sector could be heading for its worst Christmas for 25 years. Rising borrowing and energy costs coupled with high levels of consumer indebtedness have heightened fears of a major spending slowdown.
The updates from Woolworths and the BRC put pressure on shares in the retail sector. Woolworths fell more than ten per cent, while HMV, Debenhams and Next were all lower.
Tesco, which has captured increasing amounts of business from the likes of Woolworths in recent years, was also down by more than one per cent.
It reported another strong quarter of growth, but warned it faced inflationary pressures, particularly in market prices for produce and meat.
A number of other firms have managed to buck the gloomy trend, with John Lewis reporting record sales last week.
Argos said yesterday was likely to be its busiest day ever for online shopping, while the Interactive Media in Retail Group predicted Monday’s total internet sales were more than double the usual average of #82 million.
But on the high street, Woolworths said like-for-like sales for 18 weeks to the weekend were down 6.5 per cent on a year earlier. It said its most challenging market was entertainment, as prices were materially below last year.
Woolies, which secures around two-thirds of its business during the second half of its financial year, warned that it needed an improvement in sales for it to meet the bottom end of City profit forecasts.
The company said: "We will have the key Christmas trading weeks to come which will determine the final outcome for the year. Given that Christmas falls on a Monday this year, there will be an extra weekend for shopping which may result in retail sales falling later than usual.
"However, given the sales performance of the last two months, it is appropriate to be cautious."
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