UK High Street Retailers Worry About Profits

13/09/2007

In the last few months running up to the Christmas party season, UK retailers French Connection and Next are worried about interest rate rises. The pair worries that rate rises will have an effect on spending on the High Street. Retailers fear higher prices will mean less shopping for Christmas party hosts and holiday merry makers.

Despite the cautious outlook, Next’s six month results turned up better than expected and French Connection narrowed its losses from £3.6m to £2.5m for the six months to the end of July.

"We remain cautious about the outlook for the UK consumer," Next said in a statement. "We are acutely aware that the full effect of recent interest rate rises has not yet filtered through to our customers," it added.
Despite these warnings, Next's shares closed up more than 4% at 1940 pence.

Richard Hunter, an equity analyst with Hargreaves Lansdown stockbrokers, said Next's figures were "robust" but added that tougher financial conditions for consumers meant life would get more "difficult" for the business.

French Connection has warned that its turnover in the six months to the end of the Christmas party season and through January 2008 will be lower than at the same time last year.
"The first few weeks of the second half of the financial year have seen continued challenging trading conditions," French Connection's chairman Stephen Marks said.

Most clothing retailers have also been hit by wet weather this summer which dropped profits for the summer season fashions. Retailers are watching sales closely in the 3 months before the Christmas party and holiday season.