business

Britons Scrimp on Kitchens, Tuxedos as Retail Woes Spread

Updated on
  • Kingfisher, Moss Bros latest retailers caught up in slowdown
  • U.K. stores under pressure from inflation, rise in e-commerce

Britons are cutting back on purchases of everything from Kingfisher Plc’s new kitchens to Moss Bros Group Plc’s tuxedos as the rise of e-commerce and a squeeze on living standards claim fresh victims at U.K. shopping centers.

Comparable sales at Kingfisher’s B&Q home-improvement chain fell 5.1 percent in the fourth quarter, well below analysts’ estimates, the company said Wednesday. Just two months into its financial year, suit seller Moss Bros Group Plc warned that profit will be significantly below forecasts because of dwindling shoppers.

Moss Bros plunged as much as 33 percent, the most in 10 years, while Kingfisher fell 8.4 percent in early London trading.

“Consumer confidence is lower, inflation is higher than wages and housing transactions are down,” Kingfisher Chief Executive Officer Veronique Laury said on a call with reporters. “There are lots of elements not going in the right direction and nothing is telling us this will reverse shortly.”

2018's U.K. Retail Disasters

Source: Bloomberg

U.K. retailers are suffering as inflation stemming from the pound’s weakness squeezes living standards and uncertainty over the country’s pending exit from the European Union crimps spending. The sales decline at B&Q came amid a slowdown in demand for kitchens, adding to evidence that big-ticket spending is especially vulnerable. Floor-coverings retailer Carpetright Plc and sofa seller DFS Furniture Plc have also issued profit warnings.

The outlook for spending power is improving slightly. U.K. wage growth accelerated to 2.6 percent in the three months through January, the fastest since the end of 2016, the Office for National Statistics said Wednesday. Sterling’s depreciation since the vote to leave the EU may have run its course, limiting further pressure on living standards. Brexit negotiators reached a breakthrough this week on securing a transition deal once the U.K. quits the bloc next year.

That won’t stop the shift to e-commerce, with Amazon.com Inc. continuing to expand. Recent snowfall has compounded the misery for brick-and-mortar shops. Store sales at the U.K.’s mid-market retailers fell 28 percent in the week when a storm dubbed the “beast from the east” blanketed the U.K., according to researcher BDO.

The U.K. arm of Toys “R” Us Inc. and electronics seller Maplin have already filed for insolvency. As the problems pile up, several other troubled retailers provided updates Wednesday.

Carpetright, which has issued three profit warnings in as many months, secured 12.5 million pounds ($17.5 million) of funding to help it stay in business. The chain said it’s considering closing some stores through a British insolvency procedure known as a company voluntary arrangement.

Mothercare, New Look

Mothercare Plc, which sells strollers and clothing for infants, said Wednesday that it’s in discussions on the terms of its debt, while speaking with potential new lenders.

Creditors of embattled fashion retailer New Look are set to vote on its company voluntary arrangement. If the retailer’s plan to shut 60 stores and cut its rent bill a further 393 shops is approved, it could pave the way for other struggling chains to follow suit.

““There will be more profit warnings from struggling retailers unless they radically reduce costs,” Bloomberg Intelligence analyst Chris Chaviaras said.

— With assistance by Jill Ward

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