Rates and rain dampen non-food retailers

LONDON (Reuters) - Higher interest rates and the wettest June on record pushed non-food retailers to their worst quarter in almost two years, according to research published on Wednesday.

The number of positive trading statements issued by retailers during the second quarter fell to 31 percent, the lowest figure since the third quarter of 2005, and down from 44 percent in the first quarter, accountancy firm Grant Thornton said.

The number of negative trading statements also rose to a 15-month high of 19 percent from 10 percent in the first quarter of the year, it added.

"While some may have predicted a slight downturn in results, only doom-mongers could have predicted such a dramatic decrease highlighted in this quarter," said David Bush, head of Grant Thornton's retail services team.

Music, clothing and consumer electronics are the most vulnerable sectors, the report said after analysing quarterly statements of 40 retailers, including Marks & Spencer (MKS.L) and Tesco Plc (TSCO.L).

Music retailer Fopp recently filed for administration. The company had acquired 67 shops from rival Music Zone, which also had filed for administration earlier in the year.

"I believe that one further interest rate rise will be required to find the tipping point where consumer demand is sufficiently choked off to reduce pressure on overall government inflationary targets," he added.

Food retailers continued their buoyant trend, Grant Thornton found.

Every listed food retailer increased like-for-like and total sales during the quarter, with none issuing a profit warning.

"However, for non-food retailers, a stark contrast is emerging, with consumers evidently cutting back on big-ticket, discretionary spending," the report said.