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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 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 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. 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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