This website uses cookies so that we can provide you with the best user experience possible. Cookie information is stored in your browser and performs functions such as recognising you when you return to our website and helping our team to understand which sections of the website you find most interesting and useful.
News
On- and off-trade opt to conserve cash
d=”standfirst”>If Disraeli’s maxim about “Lies, damned lies and statistics” was ever in doubt, Britain’s high streets are testament to its validity.
Officially, retail sales rose by 1.2% between July and August, but as soon as the figures were released, all economists and commentators dismissed them as an aberration. Even the Office for National Statistics said the data could be “very volatile”. Indeed, the figure flies in the face of reality. On any other measure, the consumer is feeling more than pinched. The Bank of England, the CBI and retailing bodies all say spending is collapsing. Households are having to tap their savings to meet their bills.Â
Earlier this week, Sir Terry Leahy, Tesco’s chief executive, said Britain’s biggest retailer was adapting itself “to help the customer spend less, it’s no use trying to make them spend more.” And yesterday Marks & Spencer, the high street bellwether, said like-for-like sales fell 6.1% in the latest quarter with food sales down 5.9%. The group announced that capital spending was being trimmed by at least £100m this year to conserve cash. Cash is always king, but never more so now that the banks are reluctant to lend to even the most solid businesses.
In the drinks sector, the position goes from bad to worse. The volume of emails from Fleurets, the leading pub estate agency, is growing daily and the tone of their contents suggests ever more frantic licensees seeking to cut their losses and sell up almost at any price. Enterprise Inns, the second largest pubs group, predicts that like-for-like sales will be 5% lower in the second half of the year and that the full-year cost of helping its struggling tenants will go up by £1m to more than £9m. This will be met by delaying capital spending. The plan to convert to a real estate investment trust has been shelved to conserve cash.
Meanwhile the biggest pubs group, Punch, is seeking to buy back some debt from investors at a discount. It wants to pay 95% of the par value. That will save some cash, at least for the time being, but the level of acceptance will indicate just how badly investors believe the company is doing. Indeed, the Financial Times said the tactic “only moves the deckchairs”.
To add to the despondency, UBS (itself under severe pressure in the banking sector) says that conditions in the on-trade will not start improving until April 2010. We are living in Darwinian times.
db Finance on Friday 03.10.08