Profit margins are poised to suffer from recent price-cuts during Christmas shopping period in the UK as store groups battled weak consumer confidence and a warm winter. Retailers count the cost of this Christmas holiday trading period spoiled by poor start and heavy discounting. While there are many retailers in the UK who enjoyed a flow in sales in the last week before Christmas with healthy trading in Boxing Day sales, profit margins are expected to suffer from the above stated reason.
The retailers say, final week was better and everyone successfully made some ground but that did not give up margin through Oct to Dec. there’s hardly any retailer who had stunning Christmas. As mentioned by a senior retailer people’s margin was affected because they went on aggressive sale this time thereby diminishing the profit making in Christmas which was apparently not expected. All the forecasts made by analysts are already proved wrong; Infact profit warnings and casualties among small companies are also braced.
Deloitte, administrator of Barratts Priceless said on the situation that it could not spot even a single buyer for shoe retailer resulting in the loss of 1,610 jobs to be precise. Fashion chain that was expected to next week itself must have traded strongly provided that it didn’t begin its sale before Christmas. Analysts at Espirito Santo Investment Bank have also taken a red pen in profit forecast for numerous non-food retailers for which it projected pre-tax profit of £681m. Analysts have shaved £20m off of their year forecast for pre-tax profit of Marks and Spencer in the year to March 2012 to £675m after discount. This Christmas also proved to be crucial for Tesco that reported poor trade previous year. Disappointing performances like these in the home market could Richard Brasher, chief executive of the UK business, under pressure. Richard has been striving to recover domestic sales with price cuts of £500m.
a poor performance from Mark and Spencer has compelled chief executive Marc Bolland to reduce price. The proceedings are yet to be taken to group’s overheads chiefly its head office in Paddington. Bolland has not yet addressed the cost base and probably he could pull it to sometime through 2012. Disappointing Christmas of 2011 would have also brought his £600m store revamp plan in the view again. There’s an eye on gathering more critical information to make true opinion on the performance of M&S.
Earlier in the holiday trading season, it was seen that clothing and home retailers spending has exceeded last year this week but the worry was whether it converts into the profit or not. With discounts of up to 70 percent in many stores and excess special offers caused reduced margins. Looking at the present scenario in the UK, unemployment is likely to increase in 2012, approaching 3 million dreaded mark. Consequently people will spend less resulting in a downward pressure on the economy. Though dreadful to say but it’s true like in EU, UK may also have to face recession soon.