Debenhams, U.K. Retailers Under Pressure

LONDON -- Things are still looking tough for Debenhams. The British retailer posted profits that were slightly ahead of consensus on Thursday, but it warned investors that consumer confidence was still under pressure, rhetoric that was backed up by disappointing retail sales data for the U.K. Chief Executive Rob Templeman told reporters that his company would launch a range of promotions ahead of the holiday season, and added that while there were "some signs the wider macro-economy is improving, we still think it's difficult to predict consumer behavior." In spite of Debenhams' ( DBHMY - news - people ) cautious stance, its annual profits of 125.2 million pounds ($207 million) came in ahead of an expected 122.7 million pounds ($203 million) in profit."For a company to deliver that sort of profit in a recession is impressive," said Kate Calvert of Shore Capital in London. She added that the company was taking the necessary steps to drive growth, partly thanks to its emphasis on designers and also key developments in its online strategy. Calvert said Debenhams was currently "pitiful on the Internet" but that it was on course to become a "multi-channel retailer." Debenhams had spent more on IT in the last year and the renewed investment should lead to a greater presence online, she added.Meanwhile fresh figures showed that retail sales in the U.K. had failed to grow for the second month in a row in September, confounding expectations for a 0.5% rise."Even though th...
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Bankruptcy Looms For Iceland Tycoon

In Iceland, they call it "moratorium"; in Britain, "administration." Both schemes offer protection from creditors, and on Wednesday the once-mighty retail empire of Icelandic millionaire Jon Asgeir Johannesson had to take refuge in both.Johannesson's flagship investment company, Baugur, said on Wednesday it had filed for "moratorium" in a district court in the Icelandic capital of Reykjavik. This is not quite bankruptcy, but it's getting there: The company will get three weeks' reprieve from all due payments, and will attempt to restructure itself with the help of a court-appointed advisor. If there is no positive end in sight, the creditors will take over.The Icelandic tycoon was left with little choice after discussions with lender Landsbanki -- a "substantial" creditor to Baugur -- failed to reach an agreement. Landsbanki went to court in Britain to have several of Baugur's British assets, which had been put up as collateral, placed under administration. The assets include stakes in British department stores like Hamleys and House of Fraser, though both retailers have insisted they are able to trade as normal regardless.Landsbanki, one of Iceland's biggest banks, is in moratorium after last year's financial meltdown left it unable to meet its huge liabilities. So is Iceland's other major bank, Glitnir. The government has nationalized both and is attempting to restructure its banking system, but the knock-on effects are pitching companies like Baugur into collapse. The unraveling of Johannesson's empire is a mini credit-crunch saga in itself. Over the past two decades, his Baugur empire has traveled overseas, particularly in Britain, held aloft by a barge made of cheap debt and Nordic banking expansionism. The company invested in American department store (nyse: SKS - ...
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Marks & Spencer Passes Christmas Test

Doom and gloom helped Marks & Spencer shares avoid a sell-off Wednesday, as the retailer's nasty drop in same-store quarterly sales actually managed to meet glum expectations. Coupled with the company's decision to cut more than 1,200 jobs and close 27 stores, the news was enough to return shares to where they were trading almost a month ago.Shares of (other-otc: MAKSY - news - people ) climbed 5 pence (8 cents), or 2.1%, to 243.75 pence ($3.71), at the end of trading in London on Wednesday. The stock last reached these levels in early December, before a choppy holiday period brought the shares close to 210 pence ($3.19) at the end of 2008. Although the three months to December brought a 7.1% drop in same-store sales, Marks & Spencer said its new cost-saving measures would help carve 175 million to 200 million pounds ($260.1 million to $297.2 million) out of annual operating costs. Meanwhile, shares of rival retailer (other-otc: DBHMY - news - people ) ended flat, and clothing retailer (other-otc: NXGPF - news - ...
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Marks & Spencer Slims Down For 2009

Iconic British retailer Marks & Spencer may have narrowly avoided a worse than expected drop in sales during the Christmas period, but the big picture has not changed all that much. Britain is in a recession; consumers are feeling the squeeze; and as a result Marks & Spencer is going to cut more than 1,200 jobs and close 27 stores.The announcement of these fresh cost savings, which will help carve 175 million-200 million pounds ($260.1 million-$297.2 million) out of annual operating costs, pushed shares of (other-otc: MAKSY - news - people ) up 2.3%, or 5.50 pence (8 pence), to 244.25 pence ($3.63), during morning trading in London. The retailer also slightly soothed fears by reporting a 7.1% drop in British same-store sales during the last three months of 2008, which was more or less in line with expectations.Shares of rival retailer (other-otc: DBHMY - news - people ) jumped by 5.1%, though clothing retailer (other-otc: NXGPF - news - ...
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Saving Yourself From The Bank Of England

The Bank of England is proving to be a headache for the humble British saver, who is now facing interest rates that are fast approaching zero percent. The central bank is expected to slash rates to 1.25% on Thursday, from 2.0%, and more cuts in 2009 could take interest rates below 0.5%, according to IHS Global Insight economist Howard Archer. What's a saver to do?It all depends on how desperate the situation is, according to Rebecca O'Keefe, head of investment at Interactive Investor. With companies going bust and jobs on the line, thin rates of return at regular saving accounts are less of a worry than having no money at all set aside for a rainy day. But if savers can afford to become investors by freeing up some capital and taking a look at riskier asset classes, O'Keefe recommends that they consider the corporate bond sector. Although the recession in Britain and the Euro zone has pushed companies to the brink of bankruptcy and beyond, the corporate bond market is pricing in a very high rate of default--some 60.0%, according to O'Keefe. This has led to some opportunities for investors, with the safest bet being corporate bond funds; O'Keefe said the global corporate bond market had returned 13.0% to investors in 2008, a far cry from the declines felt in other asset classes.Government bonds--in Britain, at least--would make for a dicey investment. Yields are unattractive, with Britain set to borrow a record 118.0 billion pounds this year, and faith in the British government's ability to curtail its ballooning deficit peeling back. Euro government bonds, particularly from a stern fiscal gatekeeper like Germany, may be seen in a better light; international bargain-hunters may also be looking for euro investments as the currency weakens. (See "A European Bond Bath.")As for stocks, O'Keefe was not convinced that the signals were all screaming "...
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Europe Sees A Sinking Euro

The euro currency dropped against the dollar on Tuesday after data revealed the lowest inflation figures in two years for the euro zone in December, raising the prospect of a substantial interest rate cut by the European Central Bank next week.The euro dropped against several international currencies, including the greenback, buying $1.3392, from $1.3629 late on Monday, and against the Japanese yen, buying 125.92 yen, from 127.00. The (nyse: FXE - news - people )exchange-traded fund that tracks the euro, fell 1.5% in pre-market trading in New York. Euro zone consumer price inflation fell to 1.6% last month, from 2.1% in November, and below the European Central Bank's target of 2.0%. The figures confirm that inflation will fall below 1.0% this year, while deflation remains a possibility, according to IHS Global Insight economist Howard Archer. The euro's fall against sterling was slightly contained by gloomy economic data out of Britain. The pound bought 1.0936 euros, from 1.0776 euros on Monday after Britain's Chartered Institute of Purchasing and Supply index for December showed that the country's service industry was continuing to contract, while a survey by thrift Nationwide showed that December house prices fell 2.5% from November. European markets remained resilient on Tuesday, though, with the Dow Jones Euro Stoxx 50 index up 1.2%, at 2,582.95 points. Britain's FTSE 100 rose 1.0%, while France's Cac 40 and Germany's DAX were up 1.2%, and 1.4% respectively. British regulator the Financial Services Authority said that the temporary ban on ...
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M&S Tries A Sales Blitz

It's bold, it's brash, it's ... Marks & Spencer?The iconic British retail chain famed for its high-quality underwear and understated sale promotions is holding an unprecedented sale event on Thursday, in which almost all the items in its stores will be priced 20.0% lower. Oddly, there has been almost no advertising for the event aside from a short evening blitz scheduled to launch after 5 p.m. on Wednesday evening; plenty of information appeared in the press on Wednesday, though, saving the chain precious publicity dollars. "Obviously customers are telling us that they're feeling the pinch ... so we're helping them to make Christmas special this year," an M&S spokeswoman said. But the company is keen to help itself too, and its sale shows the lengths mid-market retailers will go to keep customers from scaling back spending or flocking to cheaper rivals with the holidays approaching. Earlier this month, British retailer John Lewis showed how much its peers were suffering: Sales in the week to Nov. 15 fell 14.0% from last year. On Nov. 4, (other-otc: MAKSY - news - people ) reported that its earnings per share for the first half of the fiscal year had fallen to 14.2 pence (21 cents), from 23.2 pence (35 cents) last year, though that was at least better than expected thanks to tight cost controls. (See "Marks & Spencer Reaps Dividends")Arch rival (other-otc: ...
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