Top UK chains see silver lining in weak spending

London: Two of the UK's biggest retailers, Kingfisher and fashion chain Next, said conditions for consumers were likely to slowly improve this year after a prolonged squeeze in disposable incomes.

Retailers across Europe have been struggling as spending has been hit by rising food and fuel prices, muted wages growth, worries about unemployment and government austerity measures.

Official data underlined how any recovery in sentiment will be a hard slog, as figures showed another cut in spending last month.

"I don't think things are going to get any worse than last year, they may get slightly better, but I don't think they're going to get a lot better," Next chief executive Simon Wolfson told Reuters on Thursday, after his firm reported a 5 per cent rise in 2011-12 profit.

Wolfson, a prominent supporter of Britain's ruling Conservative Party who sits in the upper house of parliament, said although falling inflation was good news for the consumer economy, its positive impact was being largely offset by unemployment and tight credit availability. He is also concerned that any worsening in the Eurozone sovereign debt crisis will feed through to the UK consumer.

February retail sales data from Britain's Office for National Statistics (ONS) fell well short of economists' forecasts. British retail sales suffered their biggest monthly fall in nine months and were revised sharply downwards for January. British chains are hoping summer events, such as Euro 2012 football competition, the London Olympics and celebrations to mark the Queen's Diamond Jubilee, will stimulate trade. "I think the feel good factor will be something that gradually comes in through the year," Kingfisher CEO Ian Cheshire told reporters after the group reported a 20 per cent rise in yearly profit. "The combination of Jubilee and the Olympics won't create immediate cash opportunities but it's an important part of getting people into a more positive frame of mind."

Next, Britain's No 2 fashion retailer, said it made an underlying pretax profit of £570.3 million (Dh3.32 billion) in the year to end-January, near the top end of its forecast range. It is budgeting for sales growth of 1 to 4 per cent in 2012-13 and profit in a range of down 2 per cent to up 7 per cent.

"In many ways, Next's figures are a microcosm of wider trends in the retail sector: sales through physical stores are under significant pressure while online is continuing to show good growth," said analysts at Conlumino.

Kingfisher, Europe's biggest home improvements retailer, made a pre-tax profit of £807 million in the year to end-January, slightly above analysts' average forecast, and detailed the next phase of its growth strategy.

"We aim to create a real leader in our industry and really break away from the pack," said Cheshire.

Many British retailers are still struggling. Furniture chain DFS posted a 31 per cent drop in first-half underlying earnings, while video games retailer Game filed a notice to appoint administrators.