July 19, 2012 / 8:43 AM / 6 years ago

UK retailers feel pain of recession, summer washout

LONDON (Reuters) - The devastating economic impact of Britain’s sodden summer was laid bare on Thursday as major retailers Kingfisher (KGF.L), Halfords (HFD.L), JJB Sports JJB.L and Mothercare (MTC.L) all said the exceptional wet weather had hit demand, fraying investors’ nerves.

Government data also showed that overall June retail sales were worse than expected.

The wettest April to June period since records began has exacerbated an already tough situation for retailers in an economy mired in recession and austerity, hitting sales of goods ranging from barbecues to bicycles to football shirts.

Britain fell back into recession at the start of the year and consumers are holding back on spending. Although inflation is easing and unemployment falling they are still being squeezed by meager wage increases and government austerity measures designed to cut record debt.

A constant stream of negative headlines about the impact of the euro zone debt crisis is also weighing on confidence.

Prime Minister David Cameron will have done little to lift the move when he said on a newspaper report that Britain’s program of spending cuts could last until 2020.

“I can’t see any time soon when ... the pressure will be off,” he said in an interview with the Daily Telegraph.

Thursday’s raft of retail updates came as official retail sales data for June showed retail sales volumes fell by 0.7 percent, the sharpest fall since the first quarter of 2010.

“The unprecedented wet weather across Northern Europe has continued throughout our second quarter so far, clearly impacting footfall and consumer demand for outdoor and seasonal products,” said Ian Cheshire, chief executive of Kingfisher (KGF.L), Europe’s biggest home improvement retailer.

Kingfisher said underlying sales fell 0.4 percent in the 10 weeks to July 7, the bulk of its fiscal second quarter.

That represented a pick-up from a first quarter fall of 4.8 percent, but reflected price cuts at its B&Q business in the UK and Ireland to clear horticultural stocks as well as other promotions. That will hit B&Q’s profit margins.

Shares in sporting goods retailer JJB Sports JJB.L tumbled 27 percent after the firm warned it was running into funding problems again and was in talks with strategic partners.

The firm, which issued a profit warning last week on the back of poor sales of Euro 2012 football shirts, also reported an 8.7 percent slump in first half underlying sales.

Halfords (HFD.L), the bicycles to car parts retailer, parted company with its chief executive of four years, David Wild, as it posted a 5.6 percent fall in underlying sales over its first quarter to June 29.

“The consumer environment remains difficult and the unseasonal weather conditions this quarter had a direct impact on sales of cycles and outdoor leisure products,” said chairman Dennis Millard, who will temporarily take on an executive role while Wild’s successor is sought.

Halfords warned it expected negative like-for-like sales for the balance of the year and 2012-13 pretax profit of 62-70 million pounds ($97-$109 million).

Its shares, down 45 percent over the past year, rose 8 percent on the back of Wild’s exit.

Mother and baby products retailer Mothercare reported a 6.7 percent fall in underlying UK sales over its first quarter to July 14, highlighting “challenging trading conditions”, offset in part by an 11 percent rise in international sales.

Sports Direct, Britain’s biggest sporting goods retailer, bucked the gloomy trend, posting a 17 percent rise in year profit.

The unseasonably cold and wet weather has not been bad news for all retailers.

John Lewis JLP.UL, Britain’s biggest department store group, has enjoyed stellar trading this summer as the deluge of rain has driven footfall from the high street to the covered shopping malls where its stores are often located. Wet and cold weather is also favorable for its key household goods business. ($1 = 0.6401 British pounds)

Reporting by James Davey; additional reporting by Rhys Jones, Sarah Young Karen Rebelo and Sophie Kirby. Editing by Jeremy Gaunt.

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