“The effect is definitely negative” in terms of sales, Simon Wolfson said today in a telephone interview after Next reported first-half revenue growth that beat analyst estimates and increased its full-year profit forecast.
Wolfson’s admission comes a day after researcher Experian said London store visits slumped on the opening two days of the games, which started July 27. The decline in shopper numbers will disappoint retailers in the city, who had expected excitement surrounding the games and a related increase in tourism to help revive sales that are struggling amid the U.K. double-dip recession and stalling consumer confidence.
“The Olympics were positioned in the long run to be a boost to the economy and the retail sector,” said Bryan Roberts, director at Kantar Retail. “But a lot of anecdotes like Next suggest stores are seeing much lower traffic.”
London is suffering from a “displacement effect,” with many locals choosing to work from home and Middle Eastern tourists, typically big spenders over summer, avoiding the city after warnings from transport authorities of travel congestion during the games, said Jace Tyrrell, a spokesman for The New West End Co., which represents 600 retailers in the area.
As many as 1 million extra visitors are expected each day during the games, making 3 million journeys on public transport in addition to the usual 12 million, according to Transport for London. Access to the city’s streets is limited during the Olympics, with 30 miles of Games Lanes restricted to athletes, officials and the media from 6 a.m. to midnight.
“The negative publicity around public transport has been very effective, but probably too effective” for the capital’s retailers, said Kantar’s Roberts.
The number of visitors to stores in West London fell 10.4 percent from a year earlier on July 27, the day of the Olympics opening ceremony, and 11.6 percent on July 28, according to Experian. In East London, where the Olympic stadium is located, store visits declined 7.2 percent on July 27.
“It is negative for the two weeks of the Olympics, our central London stores will suffer,” said Next’s Wolfson. Online sales at the U.K.’s second-largest clothing retailer are also impeded around major events, he said.
Business in the West End shopping district has shown some improvement since the weekend, according to Tyrell, though mid- market retailers in particular have been suffering, he said.
Tourists in London for the Olympics will start shopping at the end of the games, Tyrrell forecast, while the Olympic “family” of officials and sponsors will be attracted by the mix of luxury and mid-market brands in the capital, he said.
“We knew it would be a different trading pattern,” Tyrrell said. “All the hotels are booked up with corporates who are big spenders.”
To be sure, John Lewis Plc, the U.K department-store chain which sells official Olympic merchandise, said sales doubled last week at its Stratford store near the athletics stadium, as it sold mementos such as toy mascots, key rings and pin badges. Athletes staying in the nearby village have also been in, according to store managing director Noel Saunders.
“To make their stay at the Olympic village even more comfortable, we’ve sold high numbers of door stops, coffee machines and doormats,” Saunders said.
Next’s Wolfson said the slowdown in central London shopping isn’t representative of the country as a whole.
“We’re only talking about central London, that’s the only part that’s being affected,” the CEO said.
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