Retail giant’s profits plunge as U.K. recession bites

Press, 15 August 1980, Page 6

Retail giant’s profits plunge as U.K. recession bites

NZPA London Britain's giant Woolworth company yesterday reported a dramatic slump in profits as the economic recession cut into consumer spending. In the six months up to the end of July, the company’s profits were almost £l6 million (about $36 million) below profits in the same period last year. The company had pre-tax profits of just £291,000 ($698,000) compared with £16,264,000 (39 million) last year.

The immediate reaction in the City to the far worse than expected results was to knock 4|p (11c) off the company’s share price. In a statement, the Woolworth board blamed the decline on “the prolonged downturn in consumer spending,” which it described as a “feature of current retailing and a consequence of the country’s deepening economic recession.”

The slump in retail trade generally is only one manifestation of the current economic gloom. Many stores are extending summer sales and cutting prices, which is good news for shoppers fighting inflation

but — as the Woolworth figures show — bad news for firms.

Woolworths were recently forced to put several thousand staff on short-time working, a measure becoming an increasingly common part of the slump. Before the Woolworth report became known, the “Financial Times” reported that the British recession was deepening and spreading across the economy. Manufacturing remained the hardest hit and its output was falling more sharply than expected.

Central Statistical Office figures published earlier this week show that industrial output between April and June was 2.7 per cent lower than in the previous three months.

Manufacturing production dropped by 2.8 per cent even when compared with a period depressed by the British Steel strike. The “Financial Times” economics correspondent, Peter Riddell, says the figures confirm daily reports from all over industry of falling output and rising redundancies. All recent evidence suggests that output is still falling.

He says the Confederation of British Industry’s trends survey at the end of July pointed to a sharp drop in the volume of orders and output over the next four months.

Mr Riddell says this is the result of an almost simultaneous fall in domestic and export demand coupled with a rapid deterioration in the competitive position of British goods.

There are also indications that the impact of the recession is spreading to the distribution and service sectors.

The main squeeze has nonetheless been on manufacturing, where output in the first half of 1980 was about 4.5 per cent lower than the average level last year. Since manufacturing production is still falling, the fall in output for 1980 as a whole may be greater than the 4.5 per cent decline for the year forecast by the Treasury in the Budget.

As the recession bites deeper Britain’s ailing motor industry has laid-off or put on short time tens of thousands of workers. In a move which has brought back the spectre of the three-day weeks of the Edward Heath Government

in 1973, all big car makers have announced sweeping measures to try and limit the effects of the slump in the industry. Fighting plunging sales in what is traditionally one of the highest sales months of the year Vauxhall has put 30,000 workers on shorttime, and Talbot (formerly Chrysler U.K.), Ford, and Leyland vehicles have announced plans for putting a further 30,000 or more workers on short-time.

The measures, to achieve production cuts, are expected soon to spread to the vital components sector where many workers are facing redundancy or shorttime.

Few observers expect the gloom of recession to lift in the car industry. Sales are running way below last year’s levels and the market has become a bargain-hunt-ers delight. British Leyland are having an official sale — knocking up to £5OO ($1200) off the wholesale prices of their range.

And as one industry spokesman said recently: “If you can’t get the dealer to double that you’re not really trying.”