October UK retail sales fall 0.1%

Added (2008-Nov-20)

Sales on the UK's high streets fell by 0.1% in October, down for a second month in a row, Office for National Statistics' data showed.

The fall was much less than the 0.9% drop that most analysts had expected after sales fell by 0.4% in September.

Annual growth rose to 1.9% from 1.7% in September.

Many retailers have opted to hold pre-Christmas sales in a bid to boost spending at what should be their busiest time of year.

Marks and Spencer is cutting all prices by 20% for one day only on Thursday.

Some M&S stores will stay open until midnight for the discount day.

On Wednesday, Arcadia Group announced sales at Dorothy Perkins, Wallis, Evans and Burtons, and Debenhams is also holding a three-day 25% off "spectacular".

Heavy losses

Retail analyst Fraser Ramzan, of Nomura, said the rarity of the M&S sale day might persuade some people to do their Christmas shopping early.

"The customer is not conditioned to expect M&S to do these things very often," he said.

"Because M&S generally does hold its nerve until Boxing Day, people won't expect them to do this again before Christmas."

But he said there was a danger that shoppers would only buy reduced items that they would have bought anyway at full price, thereby cutting into, rather than boosting profits.

Marks & Spencer saw like-for-like sales fall 6.1% in the 13 weeks to 27 September, while Arcadia experienced a 2.8% drop from 2007.  

Woolworths has suffered particularly heavy losses and is reportedly in talks to sell its chain of more than 800 stores for a nominal price of one pound.

Paul McGowan, chief executive of restructuring specialist Hilco, said on Wednesday that talks with Woolworths were at a "very early stage".

Woolworths posted a record first-half pretax loss of £90.8m in September.

Interest rates

Earlier this month, the government cut interest rates by 1.5% in the hope of putting more money in consumers' pockets and encouraging them to spend.

However, some analysts say that any positive effect - if it comes at all - will be too late to boost sales in the run-up to Christmas.

Rising unemployment has also dented consumer confidence.