Shares in UK retailer Mothercare lost a quarter of their value yesterday after a profit warning prompted by unexpectedly poor festive trading in its home market. Separately, figures from Visa indicated spending by British consumers fell last year for the first year since 2012.
David McNamara, an economist with Davy Research, said that consumers in the UK are coming under increasing pressure as the UK economy has slowed since the Brexit vote. UK consumers are facing three main problems. According to the Davy economist the first issue is the slowing labour market. Businesses are not investing as they are worried about Brexit and so they are not hiring as many people and so less wealth is being created.
The second issue is rising UK inflation - UK inflation is now above 3% as sterling continues to decline after the Brexit vote. Wage inflation is just 2% and so people's incomes are being squeezed in real terms and the pound in consumers' pockets is not going as far it used to, Mr McNamara said.
The third issue is the Bank of England, which has started to increase UK interest rates on the back of those inflation concerns. The bank plans two to three more rate rises over the next year. Mr McNamara says that UK households have been making ends meet over the last year by borrowing more - they are taking on more more credit card debt, more paydays loans and more instore finance. So if people's interest rate payments start to go up, they will have less money to spend on the high street, he explained.
Figures from Visa yesterday indicated the worst Christmas spend for the last number of years in the UK. The final UK retail sales figures are due at the end of January. But retail sales figures for November showed quite strong volume growth due to Black Friday with heavy discounting by UK retailers very evident, according to Mr McNamara. But the economist said that what has been noticed over the last few years is that a good Black Friday outcome in November usually results in weaker Christmas sales in December. It is predicted that will again be the case in 2017, he added.
MORNING BRIEFS - Fashion retailer Forever 21 has racked up losses of €44m in Ireland and has signalled its intention to close its only outlet here. Accounts filed before the end of the year show Forever 21 had a pre tax loss of €15m here in 2016, the most recent period for which results are available. That included costs of just under €11m associated with closing its Dublin store. The shop, in the Jervis Centre, opened in 2010 and was its first outlet in Europe.
*** Dublin-based Vision-net, a provider of business information such as company accounts and credit reports, has been acquired by financial technology firm CRIF for an undisclosed sum. CRIF says over 40,000 businesses and 240,000 consumers use its business information services across 50 countries. It had revenue of €0.5 billion in 2017.
*** The fortune amassed by Amazon founder Jeff Bezos has passed $105 billion as the internet giant's share price continues to surge up 6% already in January and ahead by 57% in the past 12 months.
*** Reuters reports French prosecutors have launched an investigation into Apple over what it alleges is "planned obsolescence" in some of its iPhone models. The investigation was opened on Friday and is being led by competition and consumer protection specialists in the French economy ministry. Apple admitted in December that it intentionally slowed down the performance of older iPhone models to encourage owners to buy new phones.