IT’S bleak out there on the high street, about that there is no doubt. Non-food sales volumes fell by 1.5 per cent in February compared to a month earlier (see facing page). With Christmas long gone and the heavily-discounted January sales a distant memory, consumers have little to look forward to.
Inflation might be less aggressive than a few months ago, but February’s CPI figure of 3.4 per cent still outstrips January’s annual earnings growth reading, which stood at an anaemic 0.7 per cent. The ONS said the retail price deflator actually increased in February to 2.4 per cent, compared to a two-year low of 2.2 per cent in January, suggesting inflation could be stickier than retailers hoped.
Yesterday we got a sense of how two of the biggest names on the high street have been coping. On the face of it, retail stalwart Next is doing well. Underlying annual pre-tax profits were up around five per cent to £570.3m on sales that were 1.4 per cent higher at £3.5bn.
That was in large part due to sales at Next Directory, its online division, where sales jumped 16.4 per cent to £1.1bn, passing the £1bn mark for the first time. Store sales fell by 1.4 per cent. International sales from Next’s franchise partners were also strong, with total revenue up 13.4 per cent to £76.3m, but they constitute only a small part of the group’s overall sales.
The same can’t be said for B&Q-owner Kingfisher, which generates around 60 per cent of its revenues outside of the UK. Its French stores, which account for 40 per cent of sales, grew like-for-likes by 3.7 per cent. International sales – 20 per cent of revenues, also rose 2.2 per cent. But UK like-for-likes dropped 1.4 per cent.
So Next and Kingfisher: one a huge success online, the other internationally diversified. Neither too reliant on the UK high street. Those who can’t claim the same have some tough times ahead.