Profits and jobs pain underscores crisis for UK retail
THE scale of the challenge facing Britain’s battered High Streets was laid bare today as retailers cut jobs and posted falling sales, and a VAT cut designed to boost spending kicked in.
The temporary cut in the sales tax — from 20% to 5% until January 12 — comes in today for the troubled hospitality sector. Businesses including Starbucks, McDonald’s and Pret A Manger immediately passed on the price cut in an attempt to get consumers spending.
The move came as retailers warned
Against an uncertain economic outlook, we remain cautious in the short to medium term on demand Asos
over the consumer environment. Luxury fashion giant Burberry said it plans to make 500 job cuts after posting a 45% sales fall in the 13 weeks to June 27 due to lockdowns closing stores. However, it said sales were on an improving trend, down 20% in June, and sales growth in its powerhouse Chinese market — where the Covid-19 outbreak started — were ahead of pre-virus levels.
Meanwhile, online fast fashion seller Asos posted a 1% fall in UK retail sales to £329.2 million in the four months to June 30 and warned “against the backdrop of continued social distancing, ongoing restrictions of events and an uncertain economic outlook for our twentysomething customers, we remain cautious on the short to medium term outlook on demand”.
Overall, group revenues rose 10% to £1 billion aided by improving sales in
Europe and its rest of the world region, and it hopes the UK and US will follow suit. Boss Nick Beighton said: “Many countries are on the same curve at different intervals in the Covid crisis.”
Asos shares tumbled 152p or 5% to 3212 today.
On the High Street, electricals seller Dixons Carphone posted a 50% plunge in annual profits to £166 million as store closures due to Covid and problems in its mobile phones arm hurt earnings.
Overall UK and Ireland sales rose 1% to £4.54 billion, but group sales were down 3% at £10.17 billion and it skipped its final dividend. Boss Alex Baldock said, despite strong online trading due to demand for home office and gaming equipment, the group was planning for “weakening” spending later this year. The shares fell 7p or 8% to 79p.
Rival John Lewis’s shake-up under new chairman Sharon White gathered pace as the mutual has put the future of hundreds more jobs in doubt.
According to a memo to staff, seen by the Standard, 270 jobs in its IT “delivery and operations” division have been put into consultation spread across London, where John Lewis is based, and sister brand’s Waitrose’s Berkshire HQ.
The decision has sparked redundancy fears internally, but company sources insisted it was designed to bring the two retail brands together rather than cut costs. On top of this, 49 staff have entered consultation in its tech “architecture” division and 111 roles will be affected by outsourcing tech jobs to French consultancy giant Capgemini later this year.
John Lewis last week said eight stores will shut, putting 1300 jobs at risk.