Budget shops get a boost

15 January 2009

Bargain-hunting shoppers refused to part with their cash over Christmaswith many holding out for the sales or switching to discount chains.

While the likes of Primark and Poundland report a strong performance over the festive season, Argos and Homebase's owner, Home Retail Group, as well as DSG International, which owns Currys and PC World, were among those hard hit by consumers keeping their purse strings tightly knotted.

Homebase took a hefty knock in the 18 weeks to 3 January with like-for-like sales diving 10.2%. Its sister company Argos fared little better with sales registering a 7.5% fall over the same period.

Terry Duddy, chief executive of Home Retail Group, says "Our markets continue to be significantly impacted by the sharp reduction in consumer spending. As previously indicated, we expect the trading environment for the next financial year to be extremely challenging."

Guy Ellison, an analyst at Fortis Private Banking, says that although its sales were not as bad as expected, Home Retail Group's margins will have suffered as a result of price reductions.

Electrical goods were also out of fashion as cash-strapped consumers held off treating themselves to new computers and televisions. Currys and PC World's owner DSG International reported a 10% slump in Christmas trading – which came within the bottom end of analyst expectations – as shoppers held off making big purchases until the start of the post-Christmas sales.

Although like-for-like sales shot up 2% during the two weeks to 10 January, gross profits margins were squeezed – down 0.8% on the previous year.

The outlook for the remainder of the year is also fairly dismal. John Browett, chief executive at DSG International, warns: “We expect 2009 to be challenging across most of our markets and are actively planning and managing the business for negative like-for-like [results].”

Among the smaller retailers, Clinton Cards suffered a 4.1% drop in like-for-like sales over the five weeks to 4 January while bicycle retailer Halfords saw its sales hit the brake, down 5.8%, down though full year earnings are expected to be in line with expectations. 


Mobile phones, however, proved enduring popular over Christmas, with Carphone Warehouse - Europe’s biggest independent mobile phone seller - reporting a 6.5% rise in like-for-like retail sales. Retail revenues enjoyed a 13% rise over the last three months of 2008 and the group now expects to meet market expectations for the full year.

And discount fashion chain Primark - which is now the second largest clothing retailer by sales volume in the UK - also lured bargain hunters with total sales rising 18% in the 16 weeks to 3 January. Its strong performance was reflected among other ‘cheaper’ chains including Peacocks and Poundland.

Meanwhile music retailer HMV was boosted by strong demand for best-selling DVDs and pop albums, which lifted underlying sales by 3% for the five weeks to 3 January.

Children’s clothing retailer Mothercare also bucked the trend with total sales up 4.2% in the 13 weeks to 9 January with a 49% rise in international sales boosting a 1.1% growth in like-for-like sales.

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