It’s another bad day for the UK high street with more profits warnings, this time from Bonmarche, Carpetright and Dignity. Trading updates from the trio only add to a stream of negative new year messages from management about poor footfall, cost conscious consumers and growing preference for online versus in-store. Share price drops of 28% for the former and over 50% for the latter pair also demonstrates how significantly investors will punish those who are failing to keep up with changing consumer and market trends.

Obviously on-line only really applies to the two retailers, however funeral organiser Dignity is not without its own problems. An increasingly competitive environment and over supplied industry has pushed it to drop prices by 25% for simple arrangements and freezing prices elsewhere. Death of a salesman?

Retailer Bonmarche may well have left FY expectations unchanged, but Q4 sales -5.5% (like-for-like -6.9%; comprised of stores sales -9.7% and online +28.5%), coupled with a disappointing Xmas period except for online, echo the trends reported by peers.

Gross margin improvement is always good, but not when it’s down to less discounting which probably hindered sales. The update may not include a 2018 warning per se, however, management’s uncertain outlook, especially for weather, expecting things to remain difficult, is as good as. Especially after barley managing flat like-for-like sales in 2017.

As for Carpetright, full marks for transparency, opening with “the important post-Christmas period has been significantly behind expectations”. This has meant a significant reduction to FY expectations after UK business deteriorated sharply, with lower footfall and transactions as a result of dampened consumer confidence. The key post-Xmas period saw total sales down a worrying -2.3% (like-for-like -3.6%) with core flooring sales -7.1%. Customers have clearly decided not to splash the cash.

All eyes thus on UK Retail Sales at 9.30am, forecast to show negative growth in December (-1.0%) after November was boosted by Black Friday and cold weather (+1.2%). That said, the pace of growth over the prior 12-months may well have picked up to its best since June (2.6% vs 1.5% in Nov). Any major deviation from consensus could impact UK inflation expectations and thus GBP, with a knock-on for the UK 100 . That said, even good figures may not be enough to convince sector investor and help share priced, not while the message from companies is so downbeat.

Mike van Dulken, Head of Research, 19 Jan 2018