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Dire day for UK high street as retailers reveal poor Christmas trading Dire day for UK high street as retailers reveal poor Christmas trading
(35 minutes later)
Supermarket chain Morrisons was forced to issue a profit warning on Thursday as Tesco and Marks & Spencer also posted disappointing trading over the crucial Christmas period.Supermarket chain Morrisons was forced to issue a profit warning on Thursday as Tesco and Marks & Spencer also posted disappointing trading over the crucial Christmas period.
In an unscheduled statement to the stock exchange, Morrisons said full-year underlying profit would be below market expectations of £812m and would instead be near the £783m mark.In an unscheduled statement to the stock exchange, Morrisons said full-year underlying profit would be below market expectations of £812m and would instead be near the £783m mark.
The retailer blamed squeezed consumer spending power and its relative lack of online sales and convenience stores for poor trading, which saw underlying sales fall by 5.6% in the six weeks to 5 January.The retailer blamed squeezed consumer spending power and its relative lack of online sales and convenience stores for poor trading, which saw underlying sales fall by 5.6% in the six weeks to 5 January.
The chief executive, Dalton Philips, said: "In a very tough market our sales performance over Christmas was disappointing."The chief executive, Dalton Philips, said: "In a very tough market our sales performance over Christmas was disappointing."
Tesco, Britain's biggest supermarket chain, also announced worse-than-expected Christmas sales. In the six weeks to 5 January, revenues at stores open a year excluding petrol sales fell 2.8% with UK like-for-like sales down 2.3%. Analysts had expected sales down by up to 2.0%. Tesco, Britain's biggest supermarket chain, also announced worse-than-expected Christmas sales. In the six weeks to 5 January revenues at stores open a year, excluding petrol sales, fell 2.8%, with UK like-for-like sales down 2.3%. Analysts had expected sales to fall by up to 2%.
Tesco's chief executive, Philip Clarke, said: "Clearly Christmas was disappointing."Tesco's chief executive, Philip Clarke, said: "Clearly Christmas was disappointing."
Tesco said it expected full-year profit "within the range of current market expectations" but shares fell more than 3% in early trading as the company admitted that those expectations had been reduced by between £50m and £150m even from the time of its last update in December. Analysts now expect profits for the group of between £3.16bn to £3.42bn. The finance director, Laurie McIlwee, who is under pressure from shareholders over his handling of profit forecasts, said: "In hindsight we were a little too optimistic at the beginning of December there has been further weakness across the whole of the grocery market which we didn't anticipate."Tesco said it expected full-year profit "within the range of current market expectations" but shares fell more than 3% in early trading as the company admitted that those expectations had been reduced by between £50m and £150m even from the time of its last update in December. Analysts now expect profits for the group of between £3.16bn to £3.42bn. The finance director, Laurie McIlwee, who is under pressure from shareholders over his handling of profit forecasts, said: "In hindsight we were a little too optimistic at the beginning of December there has been further weakness across the whole of the grocery market which we didn't anticipate."
Clarke said that while sales online and in convenience stores had risen, the group's large out-of-town stores had seen sales fall. He said: "It's tough because the market is tough and consumers are still felling they don't have as much to spend." Clarke said that while sales online and in convenience stores had risen, the group's large out-of-town stores had seen sales fall. He said: "It's tough because the market is tough and consumers are still feeling they don't have as much to spend."
He added that Tesco had also taken action to limit price increases in the past six weeks and hinted that Tesco's profit margin of 5.2% might come down.He added that Tesco had also taken action to limit price increases in the past six weeks and hinted that Tesco's profit margin of 5.2% might come down.
On a dire day for the UK high street, Marks & Spencer said non-food sales in the three months to 28 December were below its own expectations. Group like-for-like sales in the eight weeks before Christmas were up 1% but over the third quarter they fell 0.2%.On a dire day for the UK high street, Marks & Spencer said non-food sales in the three months to 28 December were below its own expectations. Group like-for-like sales in the eight weeks before Christmas were up 1% but over the third quarter they fell 0.2%.
Marc Bolland, the chief executive, said improved performance over Christmas could not make up for falling sales of clothes and other general merchandise in an unusually warm October. Marc Bolland, the chief executive, said improved performance over Christmas could not make up for falling sales of clothes and other general merchandise in an unusually warm October. Turning round M&S's ailing clothing business is Bolland's biggest headache.
Bolland blamed other retailers for starting a price war in December that he said forced M&S to respond with discounts of up to 30% on general merchandise. Debenhams discounted aggressively in the runup to Christmas and unveiled a profit warning last week.
"Holding our nerve was something we were doing but the market didn't. We were not the first in; we were one of the last."
M&S said discounting would reduce its profit margin in general merchandise but that its guidance on full-year performance was unchanged. However, finance director Alan Stewart refused to give a figure for market expectations.
Britain's big retailers face multiple problems – shoppers are buying more online and are making more shopping trips to convenience stores rather than out-of-town superstores. With incomes squeezed by rising prices and stagnant wages they are also taking their custom to discounters such as Lidl and Aldi.Britain's big retailers face multiple problems – shoppers are buying more online and are making more shopping trips to convenience stores rather than out-of-town superstores. With incomes squeezed by rising prices and stagnant wages they are also taking their custom to discounters such as Lidl and Aldi.
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