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A quarterly review of all quoted retail company trading updates issued on the
London Stock Exchange has revealed that the general upturn in retailers'
fortunes has been maintained during the last three months.
During the third quarter of the year, the overwhelming majority of quoted
retailers have issued trading statements that are positive (41%) or neutral
(44%) in tone, with just 15% of retailers issuing negative statements.
These results are almost identical to those recorded during the previous
quarter.
During the corresponding period last year, just 22% of retailers issued trading
statements that were positive in tone with the majority being neutral (58%) and
the remainder negative (20%).
Large grocery retailers have continued to deliver positive results during the
third quarter of the year. Likewise, furniture retailers have also benefited
from the growth in the UK housing market.
But those retailers offering a more discretionary or high ticket product have
not performed as well as they would have hoped.
David Bush, Head of Grant Thornton's Retail Services team, commented: "It's
encouraging to see a number of retailers adapting to demanding trading
conditions, but the acid test will be whether the recovery maintains momentum up
to and after Christmas.
"The majority of retailers have increased their gross margins during 2005 by
cutting costs and improving their supply chain efficiency.
"Generally these actions have a 'one off' benefit and cannot be effectively
repeated in the short term.
"Retailers are now challenged with searching for other ways to improve their
profits, but this will not be easy to achieve through increasing sales,
especially if a hotly tipped rise in interest rates materialises in November.
"Retailers that have a genuine and effective multi-channel distribution
operation or a very clearly defined proposition are the real winners on the high
street at present.
"You only have to look at the success of John Lewis and Next's internet and mail
order operations to demonstrate this point."
In a challenging domestic retail market, Bush asserts that there is evidence of
some retailers looking to counterbalance the short to medium term sales outlook
in the UK by diversifying into overseas markets.
Source:
RedAlert
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