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Mar 20, 2009
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Big UK retailers suffer, small ones fight for life

By
Reuters
Published
Mar 20, 2009

By James Davey and Mark Potter

LONDON, March 20 (Reuters) - The impact of the economic downturn on Britain's retailers will be starkly illustrated next week when three of the sector's biggest names are expected to report a fall in full-year profit.




Second-quarter rent day on March 25 could also be a crunch date for smaller businesses, after difficulties meeting rent payments in the first quarter caused several firms to collapse.

"I think undoubtedly we'll see another rough quarter," said Nick Hood at insolvency experts Begbies Traynor. "I can't see anything that has improved the situation since Christmas."

Next (NXT.L), Britain's second biggest clothier by sales value, is expected to post a 14 percent fall in year profit on Thursday March 26, when Kingfisher (KGF.L), Europe's top do-it-yourself retailer, is also forecast to report a 6 percent decline.

Signet Jewelers (SIG.N), the world's biggest speciality jeweller, is tipped to report a 44 percent slump in annual profit on Wednesday March 25, while small fashion retailers Ted Baker (TBK.L) and Moss Bros (MOSB.L) are expected to report a fall in profit and wider losses respectively during the week.

But Sainsbury (SBRY.L), Britain's No.3 grocer, will likely counter the gloom on Wednesday March 25 with a healthy rise in underlying sales, helped by higher food prices and a trend towards eating at home as cash-strapped shoppers cut back on meals out.

FASHION AND DIY SUFFERING

Many retailers have been struggling as indebted consumers rein in spending amid soaring unemployment, sliding house prices and fears of a long and deep recession.

Analysts expect Next to report pretax profit of 430 million pounds ($626 million) for the year ended January, according to Reuters Estimates, down from 498 million in 2007-08.

Next has said it expects underlying retail sales to fall in 2009 and faces higher import costs after a plunge in sterling.

Kingfisher should post an underlying pretax profit of 364 million pounds for the year ended January, down from 386 million the previous year, according to a company poll of analysts. Cost cuts will mitigate weaker sales.

The group will unveil recovery plans for its Chinese unit, which has been hit by government restrictions on new apartments and is forecast to post a loss of about 50 million pounds.

Plans could include an asset writedown, store closures, downsizing and possible sub-letting of space, analysts say.

Signet, whose chains include Kay and Jared in the United States and H. Samuel in Britain, said in January it expected to make a pretax profit of $180-$195 million for the year ended January, down from $333.5 million as demand for gold, diamonds and wristwatches waned.

However Sainsbury should buck the gloom. It is expected to report a 5.5 percent rise in same-store sales, excluding fuel, for the 11 weeks to March 21, according to the average forecast of 8 analysts polled by Reuters.

That would be up from 4.5 percent in the previous quarter and the firm's biggest rise in underlying sales for two years.

Struggling sportswear retailer JJB Sports Plc's (JJB.L) latest extension to its banking arrangements expires on Tuesday March 24.

It said on March 17 talks on the disposal of its 50-site fitness clubs business were continuing and revealed it was also looking at a number of other restructuring options.

Reports have said it wants to dispose of 30 poorly performing stores and was considering an arrangement through which landlords would be asked to accept lower rent.

"It is unimaginable that other retailers aren't following the JJB route and threatening landlords with full-scale insolvency as an alternative to them negotiating some sort of temporary or longer term down rating of rental," said Begbies Traynor's Hood. (Editing by Dan Lalor) ($1 = 0.6865 pound)

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