Retailers to give insight into health of economy

MAJOR retailers such as Next and the John Lewis Partnership will give an insight into the health of the UK economy when they deliver trading updates this week.

Expectations are high for Thursday's half-year results from retail bellwether John Lewis Partnership after a buoyant six months.

The World Cup provided a boost for sales of flat screen televisions and party foods in June and July, while the department stores have also been benefiting from better homeware and fashion sales.

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John Lewis Partnership, which also owns the Waitrose supermarket chain, has shrugged off much of the gloom seen elsewhere, with sales rises each week suggesting a healthy increase across the board.

The group's half-year figures are expected to show a marked recovery on a year earlier, when profits slumped 19.6 per cent to 86.3m.

Nick Bubb at Arden Partners is pencilling in profits of around 125m for the six months to August.

According to Mr Bubb, like-for-like sales in the second quarter surged by around 10.5 per cent excluding VAT, although he said this slipped to nine per cent in the second quarter.

Its Waitrose grocery arm has also enjoyed a bumper year so far, stealing yet more market share as it expands across the UK and continues to target a broader audience.

The most recent figures from researchers Kantar Worldpanel showed Waitrose increased its market share to 4.1 per cent in the three months to August 8 from 3.9 per cent a year earlier.

Since the half-year experts believe trading has been even better across the department stores, thanks to wetter weather in August driving customers into its stores.

However, comparatives are set to get much tougher for the group throughout the remainder of the second half.

Fashion and homewares chain Next reports half-year figures on Wednesday but attention is likely to be focused on its outlook statement.

This follows last month's warning from the group that its prices may rise by as much as eight per cent next year due to higher costs and January's VAT increase.

Pressures such as rising cotton prices meant it expected to experience input cost inflation in the first half of 2011.

It will attempt to mitigate some of the effects but it said the impact of the cost rises combined with a new VAT rate of 20 per cent from January would result in clothing retail prices going up in the spring. There had also been a "cooling in retail demand".

The group's interim results are expected to mask these issues, with analysts at UBS pencilling in 18 per cent growth in pre-exceptional profits, to 230m, with growth in both retail and its Directory business.