Results today from John Lewis Partnership (JLP) and Kesa give further evidence of how the split in the fortunes of different retailers is widening and offers indications of what consumer demand will look like in the post-credit-crunch environment.
Grocery to department-store retailer JLP had its best week of trading last week, according to reports. Clement weather helped get shoppers on to the streets and the result is being looked at as a further indication of consumer optimism. It has to be said, the retailer’s grocery arm, Waitrose is doing better than its department store arm, but the spread of categories the company as a whole offers has obviously served to offset a shortfall in the sales of any one category.
The same can’t be said for Kesa, which operates a number of electricals chains across the world, the UK arm being Comet.
Kesa said full year like-for-like sales in the 52 weeks to 30 April were down for Comet by 7.7 per cent. The retailer is expected to reduce the head office headcount at Comet by about 300 people and has already consolidated it’s distribution systems to produce and annualised saving of £14m. It would appear from this that the retailer is doing what it can to maximise its margins in its UK arm.
The problem lies perhaps in Comet’s specialised range that has made it more vulnerable to the economic downturn than Waitrose. This grocer was expected to fair badly as shopper confidence was hit, but it appears to have benefitted from consumers shifting spending to premium essentials.
Comet on the other hand falls into the area where consumers appear to be pulling back, electricals viewed as an extravagant purchase that can be postponed until the dust settled and people are more certain of their finances. Much of that uncertainty must be about the shrinking of available credit that the purchase of big-price items at the core of Comet’s offering requires.
For instance, Apacs has just released Q1 2009 spending figures which reveal credit card purchases declined during that time by 3 per cent, while debit card purchases increased 4 per cent.
This leaves Kesa with a quandary. The availability of credit isn’t going to return to pre-crunch levels and it’s the electricals sector that is going to one of the losers. Given it’s already investing in operational efficiencies, it’s the proposition that may have to change.
Either Comet could change its ranges, to reflect in current consumer buying moods or it could find a way of helping them pay for big-ticket goods without them having to rely on the dwindling conventional credit lines.
(Pic: neoliminal cc2.0)
