Brits face more bleak outlook
Consumers likely to cut back on spending
BRITONS who chose to spend in the run-up to Christmas look set to cut back in the new year as the cost of the festive period hits home and fears over the EU debt crisis compound weak consumer sentiment.
Britain’s second-largest fashion retailer, Next, said sales and profit growth in its 2012/13 year would be modest, citing concerns over the euro zone crisis, a credit squeeze and rising unemployment.
“My sense is the underlying economic situation is slightly worse than it was in September and that the only thing that has really changed is the situation in Europe,” Next chief executive Simon Wolfson, a prominent supporter of Britain’s ruling Conservative Party, said yesterday.
Britain’s biggest department store chain, John Lewis, posted a 9.3 percent rise in sales over the Christmas trading period, gaining market share and placing it firmly in the festive winners’ camp.
However, sales in the week to December 31 fell 4.8 percent, partly as the prior-year figure was boosted by spending in the last week before an increase in value-added tax sales tax.
Consumers lured by deep discounting in the run-up to Christmas might just have helped Britain fend off contraction for another quarter.
A survey published on HEDGE funds hunting profits from falling share prices are circling many of Britain’s biggest retailers after pre-christmas discounting failed to tempt shoppers to splash the cash in the festive season.
Lacklustre festive spending is expected to blight new year trading figures from Marks & Spencer, WH Smith, Carpetright, Home Retail Group and Mothercare, all of which suffered a spike in the volumes of stock out on loan, a key indicator of short-selling interest.
Short-selling is a common way for hedge funds and other equity traders to bet on falling share prices. Short-sellers borrow stocks to sell them in the hope of scooping them up later at a lower price and pocketing the difference. Wednesday last week showed that growth in the country’s construction sector unexpectedly picked up in December, while a similar survey on Tuesday last week indicated that manufacturing might be showing signs of stabilising after a two-month decline.
“The fact that we have had this steady, persistent improvement suggests we might manage to get some growth out of construction in the fourth quarter and underpin some marginal expansion in GDP (gross domestic product),” RBS
Carpetright and Home Retail Group top the sector, with over 14 percent of their total shares out on loan. Interest in the former had climbed to a record high with almost all supply out on loan, securities lending researchers Data Explorers said.
As recession worries continue to haunt consumers, Data Explorers said retailers exposed to the gloom now accounted for six of the top 10 most shorted FTSE all share stocks.
Mothercare and WH Smith have seen appetite to short their stocks rise by 8.4 percent and 13.6 percent respectively in the last month, compared with the 3.4 percent average short interest across the sector and the 1.6 percent average across the wider FTSE all share index. – Reuters economist Ross Walker said.
A bumper Christmas for payday loans firm Ferratum suggests that for some the new year will bring a debt hangover.
The lender had won several thousand new British customers in December, who took on short-term loans to buy presents, with a fourfold increase in applications for its loans from November to December.
Domino’s, Britain’s biggest pizza delivery company, has also seen the silver lining, as customers eschewed eating out. – Reuters