John Lewis and Next join the growing list of retailers and restaurants that have warned of a consumer slowdown;
A consumer spending freeze could be disastrous for the UK economy, with over two-third of growth coming from household spending;
Problems set to continue with inflation at its highest level since Brexit vote, squeezing incomes.
LONDON — The UK economy is in pain and it is the retailers who have been crying out first.
Major UK retailers John Lewis and Next became the latest shops to warn of a slowdown in consumer spending on Thursday, in yet another sign of a serious slowdown in household spending that could be disastrous for the UK economy.
John Lewis Group, which owns the eponymous department store and upmarket supermarket Waitrose, on Thursday warned that future profits are likely to be hit by the current “difficult market.”
Chairman Sir Charlie Mayfield says in a statement: “We expect the headwinds that have dampened consumer demand and put pressure on margins to continue into next year.”
The warning came as it reported a 53% fall in profits last year, as weak demand, currency fluctuations, and big investment in reorganizing its business hit the bottom line.
High Street stalwart Next, meanwhile, managed a profit upgrade — but only because it was too pessimistic about its prospects at the start of the year. Half-year results show sales at its retail stores fell by 8% and operating profit was down 33%, hardly a reassuring long-term indicator.
“The wider economic environment, clothing market and High Street look as challenging as ever, and we do not underestimate the task of managing our stores through a period of prolonged negative like-for-like sales,” Next says in its statement.
Richard Hyman, an independent retail analyst, told Business Insider the warnings are particularly worrying as “John Lewis and Next are among our very best run, strongest retail brands.”
John Lewis and Next aren’t alone
The retailers join a growing list of shops, restaurants, and leisure brands that have warned about a downturn in UK consumer spending. Other companies that have issued similar warnings in recent weeks include:
Dunelm: The soft furnishings retailer warned: “The trading climate to remain challenging with the disposable income of UK consumers under pressure.”
Tasty: The group behind Wildwood and Dim T restaurants said it is “facing pressure on sales and margins” because “the sector as a whole has been suffering due to a slowdown in consumer spending since the beginning …read more
Source:: Business Insider