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Last Updated: Friday, 24 September, 2004, 16:38 GMT 17:38 UK
Soggy summer spells boardroom gloom
By Alex Kleiderman
BBC News Online business reporter

UK high street in the rain
Ice cream lost its appeal in the summer
A miserably wet August has sparked an outbreak of unseasonable gloom in Britain's boardrooms.

Cadbury Schweppes said its drinks business has been hit by the nasty summer weather, forcing the group to lower its expectations for profits this year.

Poor sales were "in line with the industry as a whole where cold and wet weather in 2004 compares with record summer temperatures in 2003", Cadbury said.

Coca-Cola and Unilever have also blamed the weather for low sales of soft drink and ice cream products and issued profits warnings.

And Laura Ashley and JJB Sports say sales of summer clothing lines have slumped.

But the washout is just part of a problem consumer good manufacturers and retailers have had to face this year.

Analysts say current corporate pressures need to be set against a background of cutthroat competition, interest rate increases in May, June, and August and rising fuel costs.

Euro 2004 boost

Despite the rate rise, High Street sales raced ahead in May as a spell of sunny weather encouraged shoppers to continue spending.

In the run-up to the Euro 2004 football championships, TVs, clothing, sportswear and garden furniture were selling fast and supermarkets reported beer sales had doubled.

JJB Sports was benefiting from Euro 2004 as replica football shirts flew off the shelves.

David Beckham misses penalty at Euro 2004, AP
Euro 2004 gave the High Street an early boost
But by August JJB had issued a profit warning, citing the bad weather and tough competition for poor sales at its stores.

Euro 2004 may have provided an early boost to High Street sales but it was then blamed for a cut in the number of people going out shopping in June.

Later on poor weather affected garden centre sales, and prompted clothing retailers to slash prices to attract customers.

Heavy discounting followed and resulted in a rise in clothing and footwear sales in August compared with July. But not all retailers were able to benefit.

Kingfisher found sales of kitchen and bathroom ranges at its B&Q stores helped offset poor sales of garden equipment.

But discount retail chain Your More Store said it was shutting 70 of its 180 shops after suffering increasing pressure from tight margins and heavy competition.

Winners and losers

The gloom is not universal, however.

Tesco, Next and John Lewis have come out with sparkling results in recent weeks. They have all issued upbeat forecasts for the months ahead but do admit the retail climate may become even more challenging.

Nestle said poor weather hurt demand for ice-cream and bottled water and affected half-year targets but was confident it would hit year-end sales forecasts.

UK high street
UK retailers slashed the prices of summer clothing
Richmond Foods, which makes Nestle's British ice-cream brands, surprised investors with a positive trading statement.

The firm which also makes Fab and Zoom lollies and supplies supermarkets, said delivering "excellent products at competitive prices" has helped it capture a further share in a falling market.

Analysts believe that while sales of seasonal products have been hit by the weather, increasing competition has also had a bearing on corporate woes.

"Consumption has lost a little bit of momentum recently but we are not convinced the consumer is spent out," said Howard Archer, economist with Global Insight.

"The weather has had an affect on certain items but despite interest rate rises, consumers are still prepared to buy if the product and price is right."


SEE ALSO:
Cold weather cools Cadbury sales
24 Sep 04  |  Business
Surprise rise in UK retail sales
16 Sep 04  |  Business
Weather dampens High Street sales
07 Sep 04  |  Business


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