It’s been clear for some time that UK businesses and consumers are being buffeted by some severe economic headwinds.
However, last week, one of the country’s top retail executives, with some characteristic plain speaking, highlighted just how tough he believed the environment is. Peter Marks, chief executive of The Co-operative Group, the UK’s fifth-largest food retailer, said trading conditions were “the worst I have seen in over 40 years of retailing”.
Go deeper with GlobalData
Marks made his comments as The Co-op reported a drop in half-year profits from the company as a whole and from its food business, which suffered amid the intense promotional activity in the sector. Of course, with profits from its food retail stores down by 21%, it would suit Marks to paint a negative picture of the sector and of the UK economy. However, his comments were supported by data from UK business organisation the CBI and from rival retailer Asda, which said yesterday that rising costs were making UK families worse off than a year ago.
US food manufacturers and retailers are facing similar economic headwinds – as evidenced by comments from Heinz last week when it reported its financial results for the three months to 27 July – but, as news reports worldwide showed this weekend, some have battled real, rather than metaphorical, storms in recent days.
Hurricane Irene hit the US mainland on Saturday when it reached North Carolina and, although the intensity of the storm did not meet some projections, millions of people lost power and homes and businesses were damaged. As of yesterday, Wal-Mart and Belgium-based retailer Delhaize (which runs chains including Food Lion and Hannaford in the US) still had dozens of stores closed. Already, analysts are looking at what Irene has meant for the retail sector, with some predicting that there were winners and losers from the storm.
The storm appeared at a time when US retailers and manufacturers are facing weary consumers. Dutch retail giant Ahold, one of the grocers that closed stores due to Irene, faced questions over its US performance last week. Ahold’s identical-store sales excluding fuel in the US increased 1.2% in the second quarter of 2011 but admitted that inflation was over 4%. Ahold, which also runs chains including Stop & Shop and Giant Carlisle in the US, also saw its margins across the Atlantic fall due to the change in timing of Easter, partial success in passing on higher fuel costs to consumers and increased promotional costs. Nevertheless, Ahold CEO Dick Boer said the retailer had performed better than its rivals in the US. “Compared to our competitors, we outperformed them again in the second quarter,” he told analysts.
US Tariffs are shifting - will you react or anticipate?
Don’t let policy changes catch you off guard. Stay proactive with real-time data and expert analysis.
By GlobalDataHeinz, which reported its first-quarter numbers last week, faced questions over consumer sentiment in the US and warned that some consumers in its domestic were “really struggling”. The ketchup maker’s comments on Australia, where it generates around US$1bn in sales each year, were also illuminating. CFO Art Winkleblack said Australia, where the country’s two main food retailers, Woolworths and Coles, are in an intense battle for market share, had become “an inhospitable environment for grocery manufacturers“.
Goodman Fielder, one of Australia’s largest domestic food makers, will agree. The company said today that its annual underlying profits were down 17%.
