U.K. Retailers Feel Pinch as Debenhams, Carpetright Struggle
(Bloomberg) -- The difficulties facing Britain’s non-food retailers were laid bare Tuesday in gloomy reports from department-store group Debenhams Plc and floorcoverings seller Carpetright Plc.
Debenhams, the operator of 250 stores across 27 countries, said full-year earnings could be at the low end of analysts’ estimates should current market volatility persist. Carpetright, which runs 426 outlets in the U.K. alone, reported a 21 percent drop in full-year earnings.
Clouds are gathering over the U.K.’s shopping districts as shoppers squeezed by price increases and stagnant wages defer purchases. An index of consumer confidence published Tuesday showed that Britons are feeling just as gloomy as they were after last year’s Brexit vote. Companies from Next Plc to DFS Furniture Plc to Majestic Wine Plc have warned that conditions are becoming tougher amid the political upheaval that followed the referendum.
“U.K. non-food retailers have been experiencing volatile trading since Easter and the non-food market has been badly affected,” Sergio Bucher, chief executive officer of Debenhams, said on a conference call. “Our customers are telling us they are uncertain because of inflation, rising food prices and fuel prices. They are being more cautious with the money they have to spend.”
Sales at Debenhams declined in the third quarter, hurt particularly by a weak market for clothing. Like-for-like revenue fell 0.9 percent during the period, which covered the 15 weeks ended June 17. The shares fell as much as 4.5 percent in London.
The department-store operator anticipates full-year pretax profit will be within the current range of estimates, which span 94.8 million pounds ($121 million) to 106 million pounds. Though it added the caveat that the outcome could be toward the lower end of that range should current market volatility continue.
Carpetright’s underlying pretax profit fell to 14.4 million pounds in the year ended April 29, meeting analyst estimates that were reduced after a downbeat April trading update.
A “challenging consumer environment and competitive landscape remain headwinds,” Chief Executive Officer Wilf Walsh said in a statement. The retailer has nevertheless made “an encouraging start” to the new financial year, he said, with U.K. like-for-like sales up 2 percent in the seven weeks ended June 17. The stock rose 11 percent, erasing some of the 18 percent slide in the month leading up to the results.
While most non-food retailers are finding conditions difficult, grocers are having a better time, latest industry figures showed. Supermarket operators posted their strongest sales growth in five years during the last 12 weeks, boosted by higher prices and hot weather, researcher Kantar Worldpanel said.