Retail round up - The Sunday papers

The Sunday Telegraph

The Bank of England will this week admit for the first time that it is set to breach its inflation target in the coming months and warn that Britain is destined for two years of soaring costs and weak growth. Mervyn King, the Bank's Governor, is poised to unveil new forecasts showing that the Consumer Price Index (CPI) will rise above 3 per cent over the next six months. In a further blow the Bank will cut its economic growth forecasts for both this year and next. The changes will spark fears of "stagflation" - weak growth twinned with high inflation - and will be unveiled in the Bank's quarterly Inflation Report on Wednesday, which will set the tone for the economy for the next three months. They come amid warnings that Britain now faces a US-style housing crash, with plummeting prices and rising repossessions. The Budget forecast that the economy would grow by 2 per cent this year and 2.25 per cent next, but the Bank is likely to forecast growth of well below 2 per cent in both years.

Best Buy plans to create as many as 30,000 jobs in Britain by opening up to 200 vast stores as part of its £1.1bn tie-up with Carphone Warehouse, The Sunday Telegraph has revealed. The long-term plan would make Best Buy one of the largest non-food retailers in the country. Last week Best Buy announced plans to acquire 50pc of Carphone Warehouse's retail business for £1.1bn. A new jointly owned company will open 'big box' Best Buy stores across Europe in a move that will "absolutely transform" the sector, say the companies. Charles Dunstone said that the deal would allow the retailers to capitalise on the trends of conversion and the growing use of mobile telephony in electrical products. "I know this sounds reckless for a chief executive, but I don't really care whether it's £900m or £1.2bn; what's important is the position I've put us in," he said.

The Office of Fair Trading's investigation into the price fixing of milk by Wm Morrison is largely based on a single e-mail, according to confidential documents seen by The Sunday Telegraph. The revelation will raise further questions about the strength of the OFT's case. Last month the watchdog paid £100,000 in damages to Morrisons after admitting that a press release published when the regulator released its provisional findings into claims of price fixing contained "serious errors". Although a number of retailers and milk processors have admitted - in return for smaller fines - that they "fixed" the prices of milk, cheese and butter in 2002, both Morrisons and Tesco have vehemently rejected any suggestion of wrongdoing. The OFT's confidential 570-page Statement of Objections - a copy of which has been seen by The Sunday Telegraph - appears to show that its case against Morrisons relies on a single e-mail from James Langan, a national account director for Arla, the milk processor, to Harvey Bennett, a buyer at Asda. "Attached shows price movement for next week as requested," wrote Langan, who correctly forecast plans by Morrisons and other retailers to increase milk prices. In its report the competition watchdog concludes: "The OFT considers that the likely source was each retailer listed... each of these retailers may be taken to have intended that Arla would use the information to influence market conditions by disclosing it to their competitors in order to facilitate further retail price increases."

Justin King will collect a bonus of around £6.5m this week when he unveils a 25pc rise in pre-tax profits. King will be awarded 1.66m shares under a long-term bonus scheme put in place in 2004. A further 1,000 senior managers will also receive shares under the arrangement. Full-year results on Wednesday will confirm that Sainsbury's has already met or exceeded the targets - which included improving sales by £2.5bn over three years - set out when King unveiled his turnaround plan, Making Sainsbury's Great Again. Under King's leadership, Sainsbury's has achieved 13 successive quarters of like-for-like sales growth, generated an extra £2.7bn of sales and has more than doubled profits. At its full-year results this week analysts expect Sainsbury's to reveal a pre-tax profit of £480m on sales of £17.7bn. Margins are expected to have increased by between 40 and 55 basis points, driven by like-for-like sales growth and a £155m cost-cutting programme.

The Sunday Times

The run of bad news from the high street will continue this week, with the publication of the British Retail Consortium/KPMG sales monitor on Tuesday. Like-for-like sales, which were down 1.6% in March, are expected to have shown a similar decline in April, raising further fears over the health of the high street and the slowdown in consumer confidence. Sales of womenswear are said to be particularly hard hit, along with homewares and furnishings. Food sales are one of the few areas to show positive growth.The trend shown by these figures runs contrary to data released last month by the Office for National Statistics, which showed retail sales rose 2% in the first three months of this year.

DSG will slash its dividend and announce plans to close dozens of stores in the first phase of new chief executive John Browett's plan to turn round the company.Up to 200 of the chain's 700 stores could go, while dozens more will be converted to accommodate both the Currys and PC World brands under one roof. Browett said DSG “has to get the UK operation right” and completely rethink its store formats. DSG has already issued two profit warnings this year, and Browett warned that it could take years to turn the group round. Analysts said DSG's dividend may be cut by as much as 50% from 6.9p last year. Last month, Browett announced that 40 of DSG's 150 Italian stores would be closed over two years. However, when Browett outlines his plans on Thursday, his vision for the UK store network will be key. A number of new formats are under consideration, including a plan to split the stores down the middle and bring together Currys and PC World.