LONDON (Reuters) - Two of the country’s biggest listed retailers reported a drop in sales in the run-up to Christmas as snow and sub-zero temperatures deterred shoppers already worried about rising taxes, public spending cuts and inflation.
Next, Britain’s No.2 fashion chain behind Marks & Spencer, said on Wednesday sales at shops open at least a year fell 6.1 percent in the 21 weeks to December 24.
Music, books, DVDs and games retailer HMV warned full-year profit would be around the lower end of forecasts and meeting a test of its lending rules in April would be tight. Its shares lost a quarter of their value.
A strong Christmas performance from department store operator John Lewis indicated a divergence between Britain’s premium and mass market retailers.
The updates, the first by major European retailers after Christmas, will add to fears that bad weather kept many shoppers at home over the biggest spending period of the year.
Sector leaders Carrefour in France, Tesco in Britain, and Metro in Germany will publish figures next week.
Next, which runs over 500 stores in Britain and Ireland, estimated it lost 22 million pounds of full-price sales as a result of snow that gripped northern Europe throughout much of December.
Sales were also hit by a shortage of best-selling lines, particularly jeans, where Next was let down by a supplier.
However, sales at Next’s Directory home shopping business rose 8.7 percent and with the company’s post-Christmas sale starting well it forecast a profit of 540-555 million pounds for the year to end-January , within its previous guidance.
Next chief executive Simon Wolfson told Reuters he expected price rises to be a bigger factor in dampening consumer demand in 2011 than government cuts and tax rises.
He expected Next’s prices would rise about 8 percent in the first half of 2011 as a result of higher input costs, particularly cotton, and the rise in VAT sales tax.
Next shares, which had fallen 11 percent over the past three months, were up 1.5 percent at 2,050 pence by 10:55 a.m..
“The shares look good, if unexciting, value, but we suspect that Next will continue to do slightly better than management’s guidance,” said Altium Securities analyst Philip Dorgan.
HMV, which has long been struggling with competition from supermarkets and the internet, said sales at British and Irish stores open at least a year fell 13.6 percent in the five weeks to January 1, with snow taking 20 million pounds off sales.
The group, originally scheduled to publish Christmas figures next week, said it would sell or close around 60 British stores over the next year and take other steps to make sure it passed a test of its lending rules in April.
“The market largely expected a profit warning, but the news is still depressing,” said Arden Partners analyst Nick Bubb, adding poor weather had only added to more fundamental problems in HMV’s markets where rivals like Borders UK, Woolworths, and Zavvi have gone out of business in the past couple of years.
Bubb predicted a big cut in the final dividend and that HMV might need to break itself up by, for example, selling its Waterstone’s books chain, to keep itself alive.
HMV shares were down 24 percent at 24.75 pence, after touching a record low of 23.75 pence.
Games Workshop Group, a fantasy games retailer, also said full-year profit would miss forecasts because of weaker than expected sales.
John Lewis posted a 7.6 percent rise in sales at department stores open at least a year over the five weeks to January 1, and said it had won market share in all its categories.
Managing director Andy Street said the firm’s success confirmed its strength as a multichannel retailer, a capability particularly important during the adverse weather.
But while bad weather caused problems for retailers, it appears to have helped pizza delivery company Domino’s Pizza, which said full-year profit would be at the upper end of forecasts.
(Editing by Dan Lalor)
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