Retail sales comment
Published:  18 December, 2009

LONDON: British retail and consumer goods companies have lifted profit forecasts but remain wary about prospects for 2010 as official data points to an uneven recovery in spending.

Britain has lagged other major economies in emerging from recession, but recent data suggest a return to growth in the fourth quarter of 2009 and that consumer spending is picking up heading into the key Christmas trading period.

However, British non-food retail stocks have surged around 70% this year and some analysts think this does not factor in the risk that spending might slow again in 2010, when the government is likely to hike taxes to cut borrowing.

"The market is anticipating (profit) upgrades and so performances will need to be exceptional," said Shore Capital analyst Kate Calvert of the Christmas trading period. She thought industry conditions would remain tough in 2010, though retailers could be helped by a firmer pound, low inflation and more self-help measures like cost cutting.

Travis Perkins, which runs the Wickes home improvement chain, was typical of the sector, reporting that a mix of improving sales trends and cost cutting would help it to deliver 2009 earnings at the upper end of forecasts. It also remained cautious about the future.

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