THT Thorntons

The late Easter bank holiday fillip has exposed a widening divide between retailers who benefited from the warm festivities and those that didn't, but as the revised U.K. economic growth figures Wednesday attest, the entire high street is in for a difficult year.

The Bank of England Wednesday revised its 2011 inflation expectations up and its growth forecasts down, which is reflected in a perfect storm of poorer shoppers and fewer sales destined to restrict retail growth for the remainder of the year.

J Sainsbury PLC (SBRY.LN) Wednesday became the latest grocery retailer to warn of a difficult economic environment this year even as Chief Executive Justin King acknowledged a "bouncy" April.

But like peer Wm Morrison Supermarkets PLC (MRW.LN) last week, King cautioned against extrapolating April's buoyant sales out to the rest of the year as shoppers scale back spending amid inflation, tax rises and fears over government austerity measures and job cuts.

British Retail Consortium figures released Tuesday showed a sharp return to same-store growth of 5.2% in April, from a decline of 3.5% in March. The figures were skewed by a late Easter but also reflect a warm-weather boost to food, drink, clothing and footwear.

BRC Director General Stephen Robertson said: "Considered together, the results for March and April largely cancel each other out and the overall trend is flat. The underlying pressures on the retail sector of climbing costs and depressed consumer spending will be problems for many months to come."

The April fillip wasn't a boon for all retailers though. Online grocery group Ocado PLC (OCDO.LN) said Wednesday it expects sales to grow only 21% in the first half, reflecting a slowdown in second quarter sales after growth of 24.7% in the first quarter.

The company blamed the slowdown on capacity constraints which means it struggled to keep pace with customer demand for deliveries at peak times, but also on the glut of bank holidays in April which Chief Finance Officer Andrew Bracey said disrupted shoppers' regular routines.

"Grocery shopping is about routine," Bracey said, and with three weeks of double bank holidays when people weren't at home, or went away on holiday or to their parents, this was "slightly disruptive to sales," although he stressed the capacity constraints were the main cause of the slowdown.

For bricks and mortar high street groups, the divide was equally stark. Clothing retailer Next PLC (NXT.LN) last week lifted full year guidance after the sunny weather prompted shoppers to bring forward their summer clothing spend into the spring.

But chocolatier Thorntons PLC (THT.LN) was forced to issue a profit warning after the warm weather dampened demand for chocolates over Easter.

The already struggling electrical retail sector also got no respite from the unseasonally warm and festive April. Sales at Kesa Electricals PLC's (KESA.LN) U.K. Comet chain plunged 15% on a same-store basis in the period Jan. 9 to April 30, reflecting a mood of austerity among consumers but exacerbated by the rise in VAT in January.

The company doesn't expect sales to be positive this year and is scrambling to refurbish its stores and improve online sales in an attempt to stem declining revenue.

Having already warned on profits six weeks ago, rival Dixons Retail PLC (DXNS.LN) is set to announce its own fourth quarter sales update Thursday.

The Bank of England also scaled back growth forecasts for 2012, and if, as indicated, inflation comes down and interest rates go up later this year, retailers could be in for an even longer bumpy ride.

By Kathy Gordon, Dow Jones Newswires; 44-207-842-9293; kathy.gordon@dowjones.com

Thorntons Plc (LSE:THT)
Historical Stock Chart
From Sep 2024 to Oct 2024

Thorntons Plc (LSE:THT)
Historical Stock Chart
From Oct 2023 to Oct 2024