The 11-day rally in the FTSE may have ended on Tuesday, but the record run enjoyed by equities over the preceding fortnight showed investors have real confidence that green shoots are emerging.
Retailers, particularly in the non-food sector, have been among the biggest beneficiaries and the reassuring updates over the past fortnight from Next, Morrisons and Kingfisher – three diverse giants of the sector – lends weight to the positive view of things.
Sales surveys from the BRC and ONS have shown improvements and the number of mortgage approvals are on the up, which might signal good news at last for the beleaguered furniture world.
But anyone who gets carried away with the more positive newsflow is crazy. Well managed retailers are doing better for sure, but good luck – in the shape of the very helpful weather until June – and good judgment – through clever marketing and excellent management of stocks and costs – are what’s making the difference.
July’s weather has been much more variable, and while we haven’t seen any return of the Armageddon conditions of last year and softer comparatives will be starting to help, this month’s numbers may well help sentiment return to earth.
No one should assume the corner has been turned. Higher prices in fashion and growing unemployment loom ominously in the autumn, while the return of VAT to 17.5 per cent on New Year’s Eve – plus the very real threat of a further increase, probably after the election – are longer-term threats.
And while it would be irresponsible to overstate the threat, if the usually cautious Simon Wolfson is worried about the impact of swine flu, then we probably all need to be.
As our story on River Island this week shows, along with the performance of companies like Morrisons and Kingfisher, the situation isn’t so bad as to mean that those businesses that are well run and in tune with their customers cannot prosper. The best companies are doing well and even in the toughest sectors like furniture, the better players are mopping up market share.
But no one should be kidding themselves that we are
out of the woods yet. As our Christmas feature this week (p34) shows, sensible retailers are approaching the festive season with real caution. And as for those green
shoots? On closer inspection they could easily turn
out to be weeds.
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