Retailers fear long hangover following Christmas splurge

City A.M. Reporter

ONS defied the recession to splash out on laptops, TVs, food mixers and robotic hamsters at Christmas, but retailers fear cutbacks this year as real incomes are trimmed by taxes rise and unemployment.

Analysts rushed to upgrade 2009-10 profit forecasts for firms including electricals group DSG, household goods retailer Home Retail and bicycles-to-car parts chain Halfords, which all posted higher sales yesterday.

However, share prices mostly fell amid concerns shoppers will become more cautious when credit card bills arrive.

“There’s a real concern that we’ll see some sort of prolonged consumer hangover as we head through 2010,” said Bryan Roberts, global research director at Planet Retail.

Although Britons are benefiting from historically low interest rates, retailers fear they will suffer a squeeze this year as a cocktail of pay freezes or pay cuts, rising inflation, higher taxes and public spending cuts take their toll.

DSG chief John Browett said he did not expect the UK to have “a very nasty double dip” recession. “But we’re not expecting strong economic growth either.”

Britain is taking longer to emerge from recession than most major economies due in part to its exposure to the financial services industry that was at the heart of the downturn.

While European retailers have reported weak fourth-quarter sales, most UK chains have posted strong numbers.