England might be through to the knock-out stage of the World Cup, but there’s little cheer from the high street: the CBI’s monthly survey of retailers showed that sales dropped for the second month in a row. It wasn’t all bad news - electrical retailers such as Comet and Currys benefited from a flurry of television sales – but that wasn’t enough to boost overall figures. And with the tough measures announced in Chancellor George Osborne’s Budget on the way, things may well not perk up any time soon.
The CBI’s survey shows a bit of a mixed picture. While, predictably, sales of booze fared well – thanks to the likes of supermarket Asda, which slashed prices even further than its rivals to take full advantage of football fever – sales of footwear and leather goods were muted, and hardware and DIY didn’t fare too well either. After all, who needs garden furniture when you have a 50" flat-screen TV in the lounge?
One company taking advantage of an increased appetite for fancy new TVs with its ‘Cash for Goals’ promotion was Currys owner DSG, which today reported that underlying profits jumped a whopping 61% in the last 12 months. What’s more, earnings of nearly £113m in the financial year ended May 1 mean that DSG is now profitable again – quite a turnaround when you consider that it was £140m in the red this time last year.
But DSG (or Dixons Retail PLC, as it will soon be known, to the relief of TLA-haters everywhere) can’t put all its good fortune down to beer-swilling English football fans snapping up posh new screens. In fact, the leap in profits was due almost entirely to the group’s Nordic business, which is going gangbusters with a 13% increase in sales. Closer to home it didn’t fare quite so well – UK sales actually fell 3% - although aggressive restructuring throughout the group meant that it still managed to post a 21% rise in underlying profits. So things are going in the right direction, at least.
That was the good news; the bad news was that despite this turnaround, DSG thinks the ‘challenging’ conditions of the past year are likely to continue in the coming 12 months as consumer spending comes under increasing pressure. Measures announced in George Osborne’s Budget earlier this week, especially the impending hike in VAT to 20%, means that people are likely to tighten their grip on the purse strings once more – although spending may actually increase in the short term as consumers rush out to make large purchases before the higher rate comes into force in January. So it's likely to be a mixed year for the high street.
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