Companies: BSLA    FCCN    HOF    LBE    THT    VMOB    WLW   

A mishmash palette of retail Christmas trading statements paints a blurry picture for the sector in 2006, as there appeared to be as many positive like-for-likes as there were negative.

So, while Christopher Burnett, chairman of Thorntons, could blame disappointing sales on ‘the widely publicised poor retail footfall that persisted throughout the period’, Virgin Megastores’ managing director Simon Douglas bragged that ‘shoppers returned to the high street in their droves following a sluggish start to the shopping season’.

It does appear that, as regards expectations, caution is the watchword. Chief executive Russell Hardy of Blacks Leisure and Iain Renwick of Liberty respectively admit ‘the consumer environment is fragile’ and that the year ahead is ‘viewed with some caution’.

The Business Trends Report from BDO Stoy Hayward provides more positive news, predicting that a more stable housing market and cooling oil prices will fuel a revival in consumer confidence and hence spending. The accountant expects interest rates to be held at least until the spring and for inflation to subside over the year.

Nick Bubb, bullish retail analyst at broker Evolution Securities, agrees, citing that sector buoyancy this year ‘depends very much in the interest rate – if it goes up next month that would tend to stifle the mini recovery. And if the housing market continues to trend up I wouldn’t disregard the strong Christmas trading as a blip.’

‘I think the down-trend has definitely bottomed out,’ he claims, ‘but it’s not going to be easy. I think we’ll see a digital boom and there may also be a lot of takeover activity this year. Ones to watch out for in this case are the likes of French Connection, House of Fraser and Woolworth’s, all merit an avoid rating but could be taken over.’