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Beast from the East hits retail

The backdrop for UK retailers so far this year has been one of tough trading conditions, with the likes of New Look, Moss Bros and Carpetright all revealing they’re feeling the strain. Debenhams shares hit a nine-year low this morning following news of an 85 percent drop in pre-tax profits.
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The backdrop for UK retailers so far this year has been one of tough trading conditions, with the likes of New Look, Moss Bros and Carpetright all revealing they’re feeling the strain. Debenhams shares hit a nine-year low this morning following news of an 85 percent drop in pre-tax profits. Contributor Ben Brettell, Senior Economist – Hargreaves Lansdown.

The situation in March was exacerbated by the Beast from the East, which brought economic disruption, along with joy to children’s faces. That said, a couple of high-profile retailers have bucked the trend in recent days, with both Primark and JD Sports reporting improved figures.

The weather meant a disappointing retail sales reading for March was all but guaranteed, but the figures were even worse than anticipated, with sales falling 1.2 percent as against an expected drop of 0.5 percent. This dragged down year-on-year growth to just 1.1 percent (2.0 percent forecast). The ONS said a 7.4 percent drop in petrol sales was largely to blame, no doubt a consequence of the adverse weather.

But the UK consumer has been surprisingly resilient over the past few years, even in the face of economic uncertainty, and there looks to be some light at the end of the tunnel for those suffering a squeeze in household budgets. Inflation fell to 2.5 percent in March, while the most recent wage growth figures show an acceleration to 2.8 percent. If this marks a sustained period of rising real wages, it could bode well for the retail sector – provided any pay rises aren’t swallowed up by increased mortgage payments as a result of May’s likely interest rate rise.


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