Mar 16, 2011
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Retailers say recession feeling to persist

Mar 16, 2011

March 16th - Britain may be moving out of recession, but it won't feel like it for consumers for at least another year as prices rise and unemployment remains high, leaders of the country's top retailers warned on Wednesday.


"We are not going to see consumer spend growing in the next two years," Andy Hornby, chief executive of health and beauty group Alliance Boots, said in the opening session of the Retail Week conference.

While higher taxes, rising food and fuel prices, subdued wages growth and cuts in government spending are all increasing pressure on disposable incomes, many Britons are still to make significant inroads into debt built up during the boom years.

"We've only just started the process of consumers reducing their debt," Hornby said.

Rob Templeman, head of department stores group Debenhams, said a marked change in spending habits had occurred since Christmas.

"The consumer mindset has changed ... They're looking at what they need to have, not what they want to have," he said, pointing to an 18 percent fall in redemptions of Debenhams gift cards after Christmas as a sign of a new wariness.

The cautious comments chime with a survey last week which showed UK retail sales in February fell at their fastest annual pace in 10 months, as well as a profit warning from general retailer Home Retail Group.

Executives were optimistic the British economy as a whole would not slide back into recession.

Signs of robust recovery in the manufacturing sector should be "just enough to keep us the right side" of recession, said Ian Cheshire, boss of home improvement group Kingfisher.

Richard Brasher, UK head of Britain's biggest retailer Tesco, also warned against drawing broad conclusions, saying the supermarket group was seeing some shoppers trading up to more premium ranges as well as others cutting back.

However, profit growth would be more than ever driven by cutting costs, expanding in stronger-growing overseas markets and targeting hot-spots like online retailing, executives said.

"This is the year that mobile internet goes mass market," predicted Kingfisher's Cheshire, adding 10 percent of traffic to the group's Screwfix chain was now from mobile phones.

Brasher said Tesco's iPhone app had been downloaded 1 million times since September and one in five hits to its website was now from a mobile phone.

(Editing by David Holmes)

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