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Are UK Retailers Feeling the Pinch?

UK retailers J. Sainsbury and Woolworths reported sales that disappointed slightly, sparking comments that British consumers may be orienting towards discount retailers, analysts said on Wednesday.

Meanwhile, Swedish-based Hennes & Mauritz said good weather and a weak dollar which contributed to improved margins boosted its second-quarter pretax profit and May retail sales beat analysts' forecasts.

J. Sainsbury, Britain's third-biggest supermarket group, lagged rivals with a 3.4 percent rise in first-quarter underlying sales, but said its expectations for the full year remained unchanged.

"Although the figures were up against difficult comparatives, they are, in our view, disappointing and provide evidence that consumers are trading down in format, moving to the more value orientated retailers," Seymour Pierce analyst Freddie George told Reuters.

Sainsbury, which runs over 500 supermarkets and more than 300 convenience stores, said it had responded to a tougher trading environment with its "Feed your Family for a Fiver" campaign and by extending its "basics" range.

Sales at shops open more than a year rose 3.4 percent, excluding fuel sales, in the 12 weeks to June 14.

Forecasts had ranged from 3.2-5.0 percent, with an average of 3.8 percent, according to a Reuters poll of nine analysts.

Sainsbury's first-quarter performance was the weakest of the recent sales numbers from Britain's top four grocers.

Market leader Tesco reported a 3.5 percent rise in comparable sales for the 13 weeks to May 24. Number two Asda, owned by U.S. giant Wal-Mart, delivered a 6.4 percent rise for the three months to March 31 and number four WM Morrison a 7 percent increase for the 13 weeks to May 4.

Sainsbury's sales growth compares with a 4.1 percent rise in the fourth quarter and a 5.1 percent increase in the first quarter of its last financial year.

Sainsbury is currently expected to make profit before tax and one-off items of 556 million pounds in the year to March 2009, according to the median forecast of 21 analysts polled by Reuters Estimates.

Woolworths CEO to Step Down, Sales Dip

British sweets-to-DVDs retailer Woolworths Group said that Chief Executive Trevor Bish-Jones was to step down, as it unveiled a 2.2 percent dip in sales for the financial year to date.

Woolworths, one of Britain's most recognized high street names, with more than 800 stores, said this was "an appropriate time to seek new leadership for the business".

Bish-Jones will continue in his role for the next three months to enable a search for his successor, which is already under way, to be completed, the company said in a statement.

The retailer said like-for-like sales at its high street stores fell 2.2 percent in the first 19 weeks of its financial year.

Total group sales were down 1.9 percent in the 19 weeks to June 14.

Woolworths also announced it would dispose of the leases on four London stores to Waitrose for 25.5 million pounds ($50.2 million).

-- Reuters contributed to this report