Tablet PCs, cheap fashion lift UK retailers

LONDON Thu Jan 17, 2013 1:05pm GMT

1 of 2. People walk past the PC World store in Watford, southeast England, June 25, 2009.

Credit: Reuters/Nigel Roddis

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LONDON (Reuters) - Trading updates from six major British retailers on Thursday demonstrated that must-have gadgets, cheap fashion and internet sales were key to overcoming an otherwise tough Christmas.

Consumer spending generates about two-thirds of Britain's gross domestic product, but job insecurity and a squeeze on incomes has put shoppers under pressure, pushing music retailer HMV, camera store Jessops and DVD rental firm Blockbuster into administration over the last week.

The British online market, however, grew 14 percent in 2012, according to online retail industry body IMRG, which forecast it would grow 12 percent to 87 billion pounds in 2013.

Retailers are having to adapt and Thursday revealed a few bright spots, with Dixons Retail, Europe's second largest electricals retailer, selling five tablet PCs a second in the week before Christmas and beating analysts' forecasts with a 3 percent rise in group sales at stores open over a year.

"This Christmas everybody wanted a tablet," Chief Executive Sebastian James told reporters.

In the 12 weeks to January 5, Dixons' fiscal third quarter, the firm sold "well over 1 million" tablets, he said, with Apple iPad, Samsung Galaxy and Google Nexus the most popular lines.

Though group gross margin was down 0.5 percent and sales are still falling in Italy and Greece, Dixons said it would meet year profit forecasts and its shares rose 1.5 percent.

REPOSITION

Argos owner Home Retail, which in October unveiled a plan to reposition its catalogue-led business to an internet-led one, raised its year profit forecast, pushing its shares up 16 percent.

Argos, which also saw strong demand for tablets, posted better-than-expected third quarter like-for-like sales growth of 2.7 percent.

"We had a fantastic performance as far as tablets are concerned," said CEO Terry Duddy, also noting that internet sales now represent 42 percent of Argos' total sales.

Shares in Home Retail were among the most shorted on the stock market prior to Thursday's update, according to data published by Britain's Financial Services Authority, so some fund managers will be staring at hefty losses.

FASHION ON A BUDGET

While Marks & Spencer, Britain's biggest clothing retailer, posted a weak Christmas trading update last week, cheap online fashion retailer ASOS reported another strong trading performance over the festive period on Thursday.

The company, which targets young women seeking celebrity-style fashion on a budget and has even clothed U.S. First Lady Michelle Obama, said UK sales climbed 34 percent year-on-year in December, while international sales jumped 47 percent.

"I would like to think these growth rates can continue," said CEO Nick Robertson, noting 93 percent of the global internet population reside outside of the UK.

A higher-than-expected 25 percent increase in sales at discount fashion retailer Primark, whose website boasts a men's hooded top for 10 pounds, also underpinned a 10 percent rise in group sales at owner Associated British Foods, sending its shares up 7.3 percent.

"Nobody's got growth rates like these," said Finance Director John Bason.

Britons seeking a cut-price Christmas also drove a 3.1 percent rise in third-quarter underlying sales at Booker, Britain's biggest cash-and-carry wholesaler.

But Mothercare, the baby and maternity products retailer, remained a laggard. Despite a change in management last April its UK like-for-like sales slumped 5.9 percent in the third quarter and its shares fell 1 percent.

Official data for British retail sales in December will be published on Friday.

(Reporting by James Davey, additional reporting by Neil Maidment, Kate Holton, Paul Sandle, Helen Massy-Beresford and Brenda Goh; Editing by Will Waterman and Philippa Fletcher)

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