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Last Updated: Tuesday, 8 March, 2005, 16:42 GMT
Retail sales stagnate in February
Shoppers outside French Connection in London
The January sales provided only temporary relief for retailers
The spending slowdown which hit UK retailers over Christmas continued into February, a study has said.

The British Retail Consortium said like-for-like sales fell 0.3% in the four weeks to 26 February, the third year-on-year decline in four months.

Some reports had predicted a decline of 1% to 2% as bad weather and higher interest rates hit spending.

Meanwhile, shares in retailer French Connection lost 3.7% after it said recent sales fell 17% on a year ago.

BRC director general Kevin Hawkins said a January sales boost had gone, with trade now at weak pre-Christmas levels.

"Consumer confidence is evidently still weak and concern over interest rates and the housing market continue to impact on retail sales across all sectors," he said.

Price cuts

The BRC said overall clothing sales were poor, despite good sales for some retailers, while the electrical and electronic goods sector fell back heavily following the January sales.

Sales in DIY, gardening, furniture and carpets were also adversely affected.

Recent trading conditions on the UK High Street have been very difficult
Stephen Marks, French Connection

UK shop prices had fallen at their fastest annual pace in seven years during January, as stores heavily discounted goods in the sales.

And that trend continued in February, with many retailers forced into price cuts on big-ticket items, especially computers.

The overall trend for the three months to the end of February show like-for-like sales down by 0.1% - saved only by a 0.5% rise in January.

New lines

On Tuesday French Connection said pre-tax profits for the year to the end of January were 33m ($63.3m), down 15% on the year and in line with the revised forecast it gave in November's profit warning.

"Recent trading conditions on the UK High Street have been very difficult, however even in the light of this our current trading is very disappointing," chairman Stephen Marks said in a statement.

The retailer said like-for-like sales during the first five weeks of its new financial year were down 17%.

The group, known for its controversial 'fcuk' logo, had pinned hopes of a recovery on its new-season clothing.

Evolution Securities analyst Nick Bubb said recent cold weather had led to fears of lower sales since the end of January, but added: "We didn't expect them to be 17% down, like-for-like."

He also pointed to cautious noises being made about wholesaling of French Connection's latest ranges, with repeat orders at a lower level than last year.

Last week, health and beauty chain Boots issued a profit warning after it said it had been experiencing "subdued trading" this year.

And department store chain John Lewis, seen as an indicator of High Street activity, said its sales were 2.5% lower in the four weeks to 26 February.

Rates plea

One area of encouragement came from food and drink sales, where fruit and vegetable sales benefited from a healthy eating drive and demand for meat was boosted by a number of promotions.

Helen Dickinson, head of retail at KPMG, which collates the figures on behalf of the BRC, said the weather had been a major factor in February's numbers.

"Many retailers will be crossing their fingers and hoping that this is a temporary blip - prompted by the weather - and not an indication of something more serious," she said.

However, some retail leaders said the latest BRC figures showed the Bank of England that its monetary policy committee should keep interest rates on hold at 4.75% later this week.

David Frost, director general of the British Chambers of Commerce, said: "There is no need for another interest rate rise now. It would have a very damaging effect."

UK retail sales edge up slightly
01 Mar 05 |  Business
Sales 'spur shop price deflation'
10 Feb 05 |  Business
Sales 'fail to boost High Street'
08 Feb 05 |  Business
Christmas sales worst since 1981
21 Jan 05 |  Business
Festive sales 'worst in 10 years'
11 Jan 05 |  Business
Sales hit at French Connection
14 Sep 04 |  Business

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