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Two weeks in the UK - 28th February

Retail sales began to stabilise in February – holding up better than had been expected according to the latest figures released from the CBI today.

The CBI quarterly Distributive Trades Survey suggested that 34% of retailers reported an increase in their volume of sales in the year to February and 36% said they had seen a reduction. The resulting balance of -2% was an improvement on last month’s survey (-22%) and exceeded expectations (-10%).

Grocers reported volumes of sales up by 55% and non-store retailers an impressive 71% up. However clothing retailers reported a fall of 41% - the lowest figure since March 2009 and the survey showed sales of durable household goods, hardware and DIY continued to suffer.

The survey also showed that price inflation in shops, although above the long-run average with a balance of +49%, is down from its peak a year ago (+73%), and at its lowest rate since late 2010 (+45%). With the latest shop price index figures due from the British Retail Consortium next week, as well as its latest monthly sales monitor figures, it will be interesting to see if the trend continues.

But the survey showed that retailers continue to worry – expecting broadly flat sales volumes this month (March) and remaining largely negative about the general business situation over the next three months for the fifth quarter in the row. This is hitting investment intentions for the year which are now at their lowest since the same time three years ago.

A report from the Institute for Turnaround in the last fortnight suggested that such inability or reluctance to invest by retailers was creating a culture of zombie companies unable to generate sufficient cash flow to repay borrowings. It said retailers had to make operational changes to survive.

Sadly however the past fortnight did see further casualties for businesses for whom such change was too late, with the final adios to Past Times which had originally closed 46 of its stores when it filed its intention to appoint administrators in January but then closed the remaining 51 stores – with the loss of 500 jobs -- last week.

Also shutting stores was Peacocks with the closure of 224 stores and the loss of 3,100 jobs post administration. However the sale of the brand and business to Edinburgh Woollen Mill, which re-entered bidding at the eleventh hour, saved 388 stores and around 6,000 jobs and retailer is also interested in a further 75 of the stores that were not part of the original deal if it can get the right terms with landlords.

With the extremes of the luxury and value market continuing to show that shoppers are either looking for value or investing in quality, the fortnight also saw the revelation of a 17% rise in profits for LK Bennett and expected record profits for Harvey Nichols after its chief executive Joseph Wan boasted that 2011/12’s figures – ending next month – would beat the previous record of £18 million. The results come after changes to its business to allow it to better weather the storm and a series of pop up shops over the Christmas period allowed it to extend its customer reach.

And at the other end of the scale Primark in its latest trading update also revealed a cautiously hopeful report with like for likes set to rise by 2% in the first half and total sales expected to rise 15% for the six months to March 3.

John Lewis was the first of the retailers to reveal the impact of Valentine’s Day and half term on its figures reporting sales up 13% year on year rising to £58.4 million for the week to February 18 with 22 of its 33 stores reporting improved performances over the week. At Waitrose the supermarket’s dine in offer helped contribute to 7.8% uplift in sales.

But shoppers are continuing to be prudent. A report from the IGD last week showed that shoppers plan to cut their number of shopping trips if prices at the petrol pumps continue to rise with over half (53%) saying they would shop less frequently if costs keep rising.

With unemployment also a key issue currently there has been furore over the Government’s Work Experience scheme Get Britain Working which requires unemployed to complete up to 30 hours a week unpaid work experience. A social media backlash erupted after an advert was mistakenly published on the Jobseekers Plus website for an unpaid night shift worker at Tesco. The likes of Matalan, 99p Stores, Poundland, Waterstones and Maplin have now either withdrawn or suspended their involvement in the scheme as a result.

As ever it seems the near future for retailing remains as uncertain as it has been for the past few months.

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