Boots sounds warning note on recovery

A downbeat trading statement from the Boots retailing group yesterday injected a note of caution into recent reports of buoyant high street spending during the Christmas period.

But Barclays Bank said credit card spending in December had been sharply higher than in 1991.

The stock market marked down stores shares after Boots reported disappointing Christmas trading, especially in its Do It All home improvements chain, a 50-50 joint venture with W H Smith.

Although the core Boots the Chemist chain showed a solid 5.5 per cent increase in sales and Boots Opticians achieved 11.7 per cent, most other parts of the retailing division were sluggish.

Sales at Do It All fell by 4.5 per cent in the three months to 31 December despite aggressive price- cutting.

In the final three weeks of 1992 the percentage sales decline worsened to double figures.

Halfords, the car parts chain, Fads, the decorating shops, and Children's World showed only very small increases. Halfords has benefited from the icy weather since Christmas.

After stripping out the benefit of new stores, Children's World showed a 6.5 per cent sales decline and A G Stanley, which runs Fads, was down 1.8 per cent.

Sir James Blyth, chief executive of Boots, said: 'It is still too soon to deduce any longer term consumer spending trends.'

However, John Lewis Partnership had a more encouraging Christmas story to tell despite the IRA bombing of its flagship store. It reported a strong late run in its department stores and an 'outstanding Christmas' in its Waitrose supermarkets.

Barclays Merchant Services said the amount of credit and debit card purchases it had processed over Christmas had topped a record pounds 2bn. BMS processes around 45 per cent of all such transactions in Britain.

Spending on Visa and Mastercard credit cards was 15.4 per cent higher in December than a year earlier, BMS reported. Spending on debit cards - which directly withdraw the amount spent from the customer's bank account - was up by 54 per cent, but much of the increase was offset by lower spending by cheque.

John Eaton, BMS managing director, said that some of the increase was a result of rising market share, but 'our figures do indicate a higher level of consumer spending than was expected'.

The CSO's cyclical indicators, released yesterday, provide further evidence that recovery may be under way, but they also suggest that the revival may face set- backs before taking hold firmly later this year.

The coincident indicator - which uses data such as retail sales and industrial production to provide a contemporaneous picture of the strength of the economy - has risen steadily last spring. But the indicator which predicts turning points four months in advance - using data like consumer credit and company orders - suggests a new year downturn.

The longer leading indicator, incorporating share prices and interest rates, points to a strengthening recovery in the second half of the year.

A tentative sign of recovery came in the Environment Department's latest housebuilding figures. They showed the number of houses started in November rising to 10,400, up from 9,000 in the previous month, adjusting for seasonal effects. This was the highest figure since the summer.