British Retailers Brace Against Downturn
Britain's biggest retailer, Tesco, announced price cuts of 50 percent. Former household favorite Woolworths began a closing-down sale. Music retailer HMV reported a sizable first-half net loss.
Thursday's poor earnings results and desperate measures to attract sales on Britain's shopping streets -- at what is usually the busiest time of the year -- underscored the bleak outlook for the country's retail sector.
"On a day when Woolworths is sadly facing full administration, investors are reminded of a key principle underlying our perceived capitalist economy, 'only the strong survive'," said Keith Bowman, an equities analyst at Hargreaves Lansdown Stockbrokers.
Retailers are at the sharp end of the global economic slowdown as people delay or cancel prospective purchases.
Even a rapid reduction in interest rates in recent months by the Bank of England to a 57-year low of 2 percent has not been enough to spur shoppers into action ahead of the key Christmas season.
And the introduction of rare pre-holiday sales by several retailers, including department stores Marks & Spencer and Debenhams, has had the undesired effect of encouraging buyers to wait on the sidelines for more deals to emerge.
Same-store sales across the country fell 2.6 percent in November, compared to the same month a year earlier, according to figures from the British Retail Consortium.
"Customers are telling us that they are delaying their main Christmas purchases as they wait for bargains," said Tesco's commercial director Richard Brasher as he announced the company's half-price sale that will begin on Friday.
Tesco, the dominant retailer in Britain and the world's third largest by revenues behind Wal-Mart and Carrefour, earlier this month said that its plan to lure in shoppers worried about the recession with a new budget range was having a positive effect.
But it also reported a marked slowdown in sales growth in third quarter.
Tesco's half-price sale encompasses around 1,000 products ranging from quad bikes to champagne flutes and seasonal foods such as Christmas pudding.
Administrators for collapsed chain Woolworths, meanwhile, said they were beginning a fire sale immediately because talks with potential suitors have so far failed to find a buyer.
Deloitte, which was appointed to run Woolworths after it filed for a form of bankruptcy protection last month, said that it would try to clear as much merchandise as possible before Christmas -- adding that store closings were only days away unless a buyer could be found for the business.
Deloitte said it was still trying to translate interest in the Woolworths' operations into a hard offer to save the company, which is just a year shy of celebrating its 100th birthday.
"While we are still seeking bids from interested parties, Christmas is clearly the busiest time of the year for retailers and it is prudent to do all we can to sell existing stock," said Deloitte reorganization services partner Neville Kahn.
Among other casualties, MFI Furniture Group called in administrators last month, blaming falling demand for "big ticket" goods and the downturn in the property market, and sofa retailer Land of Leather Holding watched its share price plummet after several profit warnings and the collapse of takeover talks last week.
Meanwhile HMV, which sells DVDs, games and books as well as CDs, reported a net loss for the first half of the financial year and warned that markets had weakened further since the end of that period.
Overall, the company reported a net loss of 19.8 million pounds ($29.5 million) for the first half, compared to a net profit of 25.9 million pounds a year earlier.
Last year's figure was boosted by a 49 million pound one-time gain resulting from the sale of HMV's Japanese retail unit.