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Next and John Lewis warn on sales

Thursday, September 13 12:08:51

Next and John Lewis, two of Britain's best performing retailers, warned of a slowdown in an already troubled sector, dampening hopes that consumers might help return the economy to growth.

Next, Britain's second biggest clothing retailer behind M&S, said today sales in August and September were disappointing, while department stores and food group John Lewis said consumer demand "remained fragile" and it did not expect its heady rate of growth to continue.

Both Next and privately-owned John Lewis reported strong first-half profits, having been two of the best performers in a troubled retail sector, so their concern is bad news for a UK economy that tipped back into recession in the first quarter and is heavily reliant on consumers to return it to growth.

Last week a retail survey said underlying sales fell in August as the London Olympics failed to provide the hoped for boost to demand, but hopes of improving economic prospects had been raised on Wednesday by data showing more Britons were in work.

The trading updates on Thursday hit shares across the sector with Next down 6.6 percent and other clothing retailers Marks and Spencer and Debenhams down 1.25 percent and 2.3 percent respectively.

The gloomier news followed comments by Kingfisher, owner of DIY firm B and Q, and J Sainsbury, Britain's third largest grocer, which said on Wednesday there were signs of a post Olympics feel good factor in the UK.

Next's Chief Executive Simon Wolfson said the firm had not yet worked out why its sales had slowed, whether it was due to the distraction of the Olympics and Paralympics, warmer weather at the end of the period or the economy.

"I don't think we'll be able to tell exactly which one of them it is until we get through to mid-October," he told Reuters.

Next, which has over 500 stores in the UK and Ireland plus nearly 200 stores overseas, as well as an online and catalogue business, stuck with its 2012 sales and profit targets after reporting a 10.2 percent rise in first half pretax profit to 251 million pounds ($404 million), in line with expectations.

John Lewis posted a 60 percent rise in first-half pretax profit to 144.5 million pounds as both its department stores and upmarket Waitrose grocery chain outperformed rivals, benefiting from more investment.

(C ) Reuters