Fitch dumped cold water on positive trading figures from companies like fashion chain Next, as well as a better-than-expected 1.2% rise in overall retail sales volumes between May and June.
But Fitch said the revival was temporary as trading was given an artificial boost by a later Easter, better weather and many retail chains beginning sales early.
“Rather than signalling an economic recovery, the recent better-than-expected trading results have been boosted by temporary factors such as weather and early aggressive promotional activities and clearance sales,” said Ching Mei Chia, Fitch’s retail and consumer analyst.
The ratings agency said consumer spending will be constrained through 2010, “likely delaying for a lasting recovery for UK retailers into 2011”.
Last week, Next said the fine weather in the first half of its trading year had added between 2% and 3% to sales.
B&Q owner Kingfisher, meanwhile, saw a second successive quarter of sales growth amid faltering competition, and better weather.
Fitch added that retailers’ margins had been squeezed by the sales and they could also find themselves unable to withdraw promotions without suffering a blow to revenues.
UK output fell 0.8% between April and June – for the fifth successive quarter. Fitch expects marginal growth of just 0.8% next year and rising dole queues – piling more pressure on the sector.
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