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Retail round up - The Sunday papers
Archived article dated Sunday January 6th 2008
Analysts to cut M&S forecasts, Christmas was disappointing for most retailers, Traders short Debenhams, House of Fraser sales up, Tesco to overhaul healthy living range, WH Smith poised for share buyback, Banks move to head off repossessions, credit crunch marks the end of easy living
THE SUNDAY TELEGRAPHCity analysts are poised to downgrade their profit forecasts for Marks & Spencer following its Christmas trading update on Wednesday. M&S is expected to deliver like-for-like sales growth of up to 3 per cent - but in recent days a number of major banks, including Morgan Stanley and Credit Suisse, have cut their forecasts with some fearing like-for-like sales may have fallen. Some analysts even believe that pre-tax profits may now not reach the symbolic £1bn mark this financial year. "It might be touch and go whether they pass the £1bn barrier after all," said Nick Bubb, retail analyst at Pali International. Another leading analyst said: "I'm below consensus at the moment but I wouldn't be surprised if I had to bring the numbers back a bit more." City traders warn that a disappointing update from M&S could trigger further share price falls. Short sellers have staked hundreds of millions of pounds on further falls. Data Explorers believes that the two most shorted stocks in the FTSE 250 are HMV and Debenhams.
The British Retail Consortium will say on Tuesday that like-for-like sales growth over the month was below the 2.5 per cent rise seen in December 2006. The figure will be a disappointment to the BRC: the body was until recently confident the December figure would be "at least" as good as last year's. Figures for shopper numbers across December paint an equally bleak picture. Data from SPSL showed that the number of people out shopping in December was 3.2 per cent lower than in 2006, worse than SPSL's forecast of minus 2.1 per cent. "Christmas 2007 really was a stop-and-start, up-and-down roller coaster. There were days in the run-up that were far busier than their equivalents in 2006, but there were just as many days that were hugely disappointing," said Dr Tim Denison from SPSL.
Short sellers have sold more than 200m shares in Debenhams, the retailer they do not own, ahead of Debenhams' trading update later this month, according to Data Explorers, a research company that monitors stock lending to detect short-selling. "Hedge funds have been shorting Debenhams' stock since June last year, but we have seen exceptional borrowing activity during the last week," said Alex Hoffman of Data Explorers. Debenhams shares fell - alongside other retailers - to close at an all time low of 75¾p on Friday. The company was floated by its private equity owners at 195p in May 2006. Citigroup - which along with Merrill Lynch bought Debenhams to the market - expects like-for-like sales at Debenhams to have fallen by 1 per cent. Credit Suisse is forecasting a 2 per cent fall in like-for-like sales.
House of Fraser defied the high street gloom and saw sales rise over the key Christmas and New Year trading period. On a like-for-like basis, sales were up 2.4 per cent up on the same period last year in the five weeks to January 3, 2008. Don McCarthy, the chairman of House of Fraser, said: “The strong Christmas trading period has been a superb end to effectively our first year in control of House of Fraser. We have seen both like-for-like sales growth and an improvement in our margins despite the general tough retail trading environment.” McCarthy claimed that the retailer had reduced the number of sale days, which had the effect of improving margins.
THE SUNDAY TIMES
Tesco has invested £2.5m in an overhaul of its Healthy Living range and the introduction of a new brand, Light Choices, aimed at dieters.The company has also rejuvenated its health website and launched a new online Healthy Living tracker that gives targeted, detailed advice on diet to shoppers. Carolyn Bradley, the commercial director in charge of the initiative, said that 20 years ago shoppers associated healthy eating largely with eating less salt and sugar and consuming fewer calories. Bradley said: “Light Choices will be more single mindedly focused on dieters and will include lighter versions of favourite foods to allow managed indulgence.” The revamp comes only days after Tesco announced the introduction of a 30-minute health-check service in pharmacies at its stores.
WH Smith is to unveil a major share buyback, analysts believe. The company hinted in October that it would consider returning money to shareholders, saying it would “review its capital structure” in early 2008. WH Smith insists it will start that review only after its annual meeting and post Christmas trading statement on January 31. But now watchers of the company believe a share buyback is all but inevitable. It has asked shareholders to grant permission to buy back up to 15% of its shares. This would cost the company £87m at its current 316½p share price and would be likely to lift earnings by about 7% in a full year.
THE INDEPENDENT ON SUNDAY
Banks are set to contact thousands of at-risk borrowers under plans to stave off fears of a huge rise in the number of home repossessions.The move, under the auspices of the British Bankers' Association, will see banks agreeing to contact borrowers over the coming months, before financial difficulties turn into a full-blown crisis. It comes amid rising concerns that over-extended borrowers will find themselves in severe difficulties later this year as fixed-rate mortgages expire. Higher interest rates and a dearth of attractive deals, as a result of the credit crunch, mean many people will face sharp increases in repayments. BBA chief executive Angela Knight said: "Banks will have to adhere to this because this will be a contractual requirement as part of their membership of the BBA. We are not going to wait and watch as consumers get into difficulties."We would urge anyone facing difficulties to first contact their bank. This should be their first port of call. But we will also proactively contact them."
THE OBSERVER
Rejected credit-card, loan and mortgage applications have forced millions of Britons to delay key purchases for their houses. According to website MoneyExpert, the number of credit card applications that were turned down rose from 2.7 million in the six months to March to 3.3 million in the six months to October. It was also harder to get an unsecured loan, with rejected applicant numbers rising from 1.4 million to 1.9 million. 'There is a reduction in available credit, there's no doubt about it,' says MoneyExpert chief executive Sean Gardner. He said even those with good credit histories were being rejected as lenders looked more closely at their ability to repay, given the higher interest rates now charged on loans. Economists are now warning that the UK economy now faces a hard landing: 'We expect 2008 to record the softest consumer spending since 1992,' says Michael Saunders, chief UK economist at Citigroup.
THE MAIL ON SUNDAY
America's General Electric is considering a dramatic exit from the controversial £2.5 billion UK store card market, where it holds the number one position, senior bankers have told Financial Mail. Amid growing concerns about the state of consumer debt in Britain and following widespread criticism over the high charges associated with store cards, GE's consumer finance arm, GE Money, is understood to be conducting a strategic review of its UK store card portfolio.
Responsible Retailing Summit 30/31st, Jan 2008, London. Over 200 delegates from the retail sector are already registered to hear presentations and Q&A sessions from confirmed speakers including Asda, M&S, J Sainsbury, John Lewis, Waitrose, Gap, DSGi, Lush, Monsoon Accessorize, Lloydspharmacy, Co operative Group and many more. To find out more about the conference follow the 'more details' link below. The conference is sponsored by Sun Microsystems and is carbon neutral courtesy of JBA
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