Jun 6, 2011
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John Lewis sales dip adds to UK spending fears

Jun 6, 2011

June 3 - John Lewis, the country's biggest department store chain, reported lower weekly sales on Friday, adding to evidence consumer spending has softened again.

John Lewis
Exterior of John Lewis store in Leicester

The employee-owned business said on Friday department store sales fell 0.8 percent to 55 million pounds in the week to May 28 and were down 3.0 percent excluding VAT sales tax, which was raised earlier this year.

The firm, which has been outperforming rivals for over a year, described the performance as "credible", given tough comparative numbers in the same week last year.

"We had a very good week of weather against us last year and this year there was rain and even hail in parts of the UK. We also have tough comparisons in EHT (electricals and home technology) to contend with due to buoyant sales of TVs for the (2010) World Cup," it said.

On Thursday Kingfisher (KGF.L), owner of B&Q, Britain's biggest DIY retailer, said a surge in sales of garden furniture and barbecues during warm spring weather had not changed its cautious outlook on consumer spending.

Howard Archer, chief economist at IHS Global Insight, said the John Lewis figures suggested consumers have become more circumspect in their spending again after splashing out in April due to the later Easter, Royal Wedding and good weather.

Consumers' purchasing power is being squeezed by high and rising inflation, muted wage growth, high unemployment, elevated debt levels, the government's fiscal squeeze and the fear of interest rate rises.

"The fact is that consumers are under pressure on a number of fronts so the likelihood is that consumer spending will remain muted over the coming months," said Archer.

John Lewis also owns the Waitrose supermarket chain. Here week to May 28 sales increased 7.3 percent to 104.2 million pounds, with the cool weather boosting sales of comfort food.

(Reporting by James Davey; Editing by Jon Loades-Carter)

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