Retailers trading well but expect conditions to become tougher

John Lewis said it expects Government cutbacks such as higher taxes, welfare cuts and reduced public spending to hit British consumers in the months ahead.

But the group is confident its department stores and upmarket grocery chain Waitrose will take more market share.

Kingfisher, which owns B&Q, beat first-half profit forecasts and said cost cuts would help it to cope with a tough consumer outlook.

Comet parent Kesa Electricals said its UK chain enjoyed a "particularly strong" World Cup thanks to soaring demand for flat screen televisions, but also warned of difficult times ahead.

John Lewis, often seen as a bellwether for the high street, reported a 28 per cent jump in profits to 110.5m for the six months to July 31.

Chairman Charlie Mayfield said: "While we expect the market to continue to be quite difficult, and certainly there are some stronger headwinds coming, we don't think we're in double dip territory."

John Lewis is reaping the benefits of investment in its fashion and online business.

Lisa Williams, managing director of John Lewis Sheffield, said the store had a strong six months, during which time sales grew by four per cent

"Fashion has been a major driver of sales," she said.

"Womenswear was up 11 per cent, benefiting from the introduction of new brands such as Damsel in a Dress and Mint Velvet."

Women's accessories also performed well in Sheffield, with sales of fashion jewellery up 81 per cent and sunglasses up 69 per cent. Despite the recession, beds and bedroom furniture sales at the store rose 13 per cent.

John Lewis said it is committed to having a retail presence in Leeds and is continuing to work with the developer, Hammerson, and the council to bring the Eastgate Quarters scheme to fruition.

A revised planning application for Eastgate, which will include John Lewis and Marks & Spencer as anchor tenants, is due to be submitted later this year.

The group has also invested in new store formats for Waitrose. The grocery chain's performance was boosted by the success of a marketing campaign featuring celebrity chefs Delia Smith and Heston Blumenthal.

Waitrose has four shops in the region in Sheffield, Willerby, Otley and Harrogate.

A store at Meanwood, north Leeds, will open later this month and a store in York is due to open at the end of October.

Waitrose said all four Yorkshire stores are performing "very strongly" with high demand for its new range, Duchy Originals From Waitrose, at the top end and good demand for the budget essential lines at the lower end.

Waitrose said sales of local and regional products continued to go from strength to strength and the top-selling Yorkshire lines were local fruit and vegetables, beers, cheese and ice cream.

John Lewis said group sales rose 9.9 per cent in the first six weeks of the second half.

Kingfisher, Europe's No.1 home improvements group, reported a forecast-beating 23 per cent rise in first-half profits, while electricals group Kesa topped forecasts with a 4.3 per cent rise in underlying first-quarter sales, with trade boosted by robust demand for TVs.

Kingfisher said it was also benefiting from investments in new

products, such as a space-saving eco-toilet with a built-in washbasin, as well as a drive to buy more products centrally, and directly, from cheaper manufacturing centres such as China.

It reported underlying pre- tax profits of 354m in the six months to July 31.

This resilience was echoed by homewares chain Dunelm, which said market share gains helped fuel a 46 per cent jump in annual profits to 76.8m.

Kesa said the World Cup helped to reverse a decline in sales seen during the year to April 30, with like-for-like sales at Comet up by 4.3 per cent in the first quarter.

The rest of the year is looking more difficult.

Chief executive Thierry Falque-Pierrotin said: "After a positive first quarter we still anticipate that our markets will remain challenging for the remainder of this financial year."

Retail shares outperform FTSE

The UK general retail share index, which has lagged the broader market by about 12 per cent this year, climbed 3.2 per cent this week, outperforming a one per cent rise on the FTSE-All Share index.

Official data from the Office for National Statistics showed UK retail sales volumes fell 0.5 per cent in August, surprising analysts who had been forecasting a modest rise after several months of resilient growth.

The data could signal that consumer demand is slipping ahead of planned Government spending cuts, which are set to be announced on October 20.

VAT is also set to rise from 17.5 per cent to 20 per cent in the new year.

The figures will add to worries that the austerity measures may derail the fragile economic recovery, possibly even leading to a double dip recession.

Richard Lowe, head of retail and wholesale at Barclays Corporate said: "The slowdown started to show in August with subdued consumer confidence finally filtering through to the High Street."