Retailers count heavy cost of snow

Retailers are counting the cost of last month’s snow which saw consumers staying at home during the key Christmas trading period.

Fashion chain Next has said the snow had cost it £22 million in lost sales and music chain HMV said its peak trading season was “significantly undermined” by severe weather.

Next estimated that 2.2% of the season’s total sales were lost as a result of the snow, meaning like-for-like sales in its retail estate were down by 6.1% in the period between August and Christmas Eve.

While it also faced increased competitor discounting in the run-up to Christmas, Next said it remained on track to improve profits by as much as 10% in the year to the end of January.

Its online and telephone business, Next Direct, initially received a boost from the snow but this was offset nearer to Christmas when customers became worried that orders would not be delivered on time. Sales at Next Direct were up 8.7% in the half-year, helping overall group sales to rise by 0.2% in the period.

The outlook for 2011 is uncertain as Next is unsure how consumers will react to the Government’s budget cuts and price inflation. The retailer expects the prices of goods it sells to rise by about 8% this year, partly as a result of soaring cotton prices and Tuesday’s VAT increase from 17.5% to 20%.

Music retailer HMV suffered even more from the snow, with the group reporting a 13.6% slump in like-for-like sales in the UK and Ireland in the five weeks to January 1 and said profits for the year to April were set to be near the bottom of the current range of City forecasts.

As well as the disruption caused by snow and ice before Christmas, HMV said its core entertainment markets remained weak and underlined the urgency with which it needed to carry out its turnaround strategy.

The group, which also owns the Waterstone’s book shop chain, admitted it is facing a battle to meet a forthcoming test on its bank covenants.

It pledged aggressive action on costs and said it would close 60 stores across its UK businesses over the next 12 months and seek a further £10 million a year of cost savings. It has more than 400 HMV stores in five countries and 311 Waterstone’s bookstores in the UK and Ireland.