Retailers write off summer

BELEAGUERED high street retailers are pinning their hopes for a successful 1995 on tax cuts later this year to stimulate a Christmas buying spree.

The sector, excluding supermarkets, is reeling after worse- than-expected April retail sales figures and unexpectedly disastrous results from WH Smith demonstrated that frail consumer confidence may be weakening even further.

"Many retailers are writing off the summer and pinning their hopes on Christmas," said Tony Shiret, retail analyst at BZW. "The demand for non- food items is not good."

WH Smith's shares plunged 12 per cent on Friday to 370p after the company warned that profits would fall about 18 per cent to pounds 115m because of a slump in sales. The company blamed growing sales of books and magazines by supermarkets, but several analysts admitted they were baffled by the speed of Smith's profits collapse after forecasts a few months ago of pounds 150m. "Frankly, we don't know why the results are so bad," said one.

Shares in other non-food retailers, including Kingfisher, Next and Marks & Spencer, which announces its results this week, also declined.

"If we get another couple of months of falling retail sales figures, people will start downgrading their forecasts all round the sector," said Sean Eddie, analyst at NatWest Securities. But he added that the figures would not necessarily continue to be as bad as April, when the volume of sales fell by 0.2 per cent.

Some analysts said that retail sales may improve over the summer but that this would be in comparison to the very low levels of last summer. The overall volume of activity was likely to remain low as consumers worried about rising interest rates and higher taxes. A tax cut in November's Budget was the most likely thing to stimulate consumer confidence in the foreseeable future, they said.

However, results in the sector are likely to be mixed this year. Next, the clothes retailer, recently announced a 16 per cent rise in sales, and a 27 per cent increase in its mail-order business, although these results did little to help its share price.