LONDON (Reuters) - Asda, Britain’s second largest grocer, expects an economic slowdown to hit consumer spending next year but remains confident about Christmas trading, a senior company executive said on Tuesday.
“As we approach 2008 we are getting ready for an economic slowdown,” Darren Blackhurst, Asda’s executive board director for food, told delegates at an IGD retail industry convention. “We are looking at tougher times as an industry.”
Blackhurst said a “perfect storm” of five interest rate increases in Britain in a year, the effects of climate change on crops and commodity prices, and the global credit crunch, looked set to punish the industry in the new year.
But supermarket groups were likely to be beneficiaries of tighter consumer spending in the short term as shoppers in recessionary environments traditionally stretched their weekly budgets by opting to buy cheaper goods, Blackhurst said.
For that reason, Blackhurst said Asda, part of world’s largest retailer Wal-Mart Stores Inc (WMT.N), was “pretty confident about Christmas and the start of 2008.”
Terry Leahy, the chief executive of Britain’s biggest retailer, Tesco (TSCO.L), said last week he was upbeat about the second half after the wettest summer on record caused the group to report its slowest growth in its core British market in 7 years.
Leahy gave a more buoyant appraisal of consumer spending. He expected there would an interest rate cut before Christmas which would provide relief to cash-strapped consumers.
J. Sainsbury (SBRY.L), Britain’s number three supermarket group, reports its results on Wednesday and analysts expect it to report a slowdown in sales due to the wet summer weather.
Reporting by Rachel Sanderson