British Weather Shines On Seasonal Retailers, For Now

After heavy snow decimated Christmas sales, the vagaries of British weather swung in favor of U.K. retailers this Easter as warm, sunny days prompted shoppers to splurge on new summer outfits.

In the first indication that at least some of the U.K.'s beleaguered retailers have enjoyed a welcome boost, Next PLC (NXT.LN) Wednesday reported better-than-expected first quarter sales and raised its full year guidance as shoppers brought forward their summer spending.

Shares in clothing and gardening retailers rose, with Next leading the FTSE 100 charge, up 4.55% to 2323 pence by late morning. High-street bellweather Marks & Spencer PLC (MKS.LN) rose 4.03% to 400 pence and Kingfisher PLC (KFG.LN), owner of DIY chain B&Q, was up 3.94% to 276 pence.

The U.K. retail sector has endured months of gloomy earnings, profit warnings and caution over the outlook for the coming year as shoppers struggle to balance their budgets and rein in spending. There had been some hope that Easter and the Royal Wedding would boost sales, a hope borne out by Next's results.

The Centre for Retail Research, a consultancy, said additional food and drink sales due to the Royal Wedding could have added up to GBP160 million to retail spending, with sales of memorabilia and the additional vacation day adding a further GBP370 million.

But while the run up to the two, four-day weekends helped, retail footfall on the day of the Royal Wedding fell 33% according to Experian, and visitors to shopping centers fell 10% on the following Saturday and 11% on the Sunday.

And as positive sentiment around the holidays fades, the Easter uplift isn't expected to last.

Tuesday the Confederation of British Industry forecast that May would be worse for retailers after they enjoyed a boost in the run-up to Easter.

"Things are far from rosy," said the CBI's chief economic adviser, Ian McCafferty. "With few signs of demand picking up rapidly in the coming months, conditions on the high street look like remaining tough for retailers."

Next said it doesn't expect the pace of sales growth to continue into the second quarter as shoppers snap their purses shut, and as price rises moderate demand for its clothes and homeware.

Next has been raising its shop-floor prices to mitigate some of the higher costs resulting from commodity price rises and wage inflation in East Asia; it forecast average selling prices to rise 8% in the second half from around 6% now.

In addition to job insecurity and tax rises, inflation is heaping pressure on consumers when they fill up the car, do the weekly food shop and spend what little is left on luxuries.

The British Retail Consortium said Wednesday shop-price inflation had edged up to 2.5% in April from 2.4% in March, predominantly because of food price inflation, and would have been higher if shops hadn't offered Easter discounts.

But the warmer weather didn't play to some retailers' strengths; confectionary specialist Thorntons PLC (THT.LN) blamed the hot spring for holding back sales of its chocolates and prompting a profit warning Tuesday.

And Next chief executive Simon Wolfson was clear the hot weather boost was specific to seasonal fare like clothes, while it did little for homeware sales.

Also, companies focused on indoor activities aren't likely to have shared in the retail euphoria. Next week troubled electricals retailer Kesa Electricals PLC (KESA.LN) will release fourth quarter earnings, including the performance of its struggling chain of Comet electricals stores which was the root cause of a group profit warning in January.

The company said Tuesday it had parted ways with Comet's managing director Hugh Harvey after five years at the helm and he is being replaced with immediate effect by his deputy Bob Darke.

A spokesman said Harvey's departure wasn't specific to Easter trading, but the business needed a new leader and this was part of ongoing measures to improve the business.

-By Kathy Gordon, Dow Jones Newswires; 44-207-842-9293; [e-mail]