Retail sales fall worse than feared

Steep falls in demand for non-food goods sent retail sales plummeting by 1.9 per cent last month as the recession tightened its grip, official figures revealed today.

The fall in volumes between January and February was far worse than expected by economists and comes as sales fell across all sectors, according to the Office for National Statistics (ONS).

It said clothing and footwear sales dropped by 3.7 per cent, while sales in other stores, mainly small businesses selling goods such as books and DVDs, suffered their worst decline since January 2005.

It is thought that heavy snowfall across the UK early last month may have impacted sales volumes, which fell 0.4 per cent when compared with February 2008 - the worst fall in more than 13 years.

However, the value of sales revealed an even worse picture for battered non-food retailers, with a 5.8 per cent fall year-on-year marking the steepest decline since the series began in 1986.

Today's gloomy figures came as Next and B&Q owner Kingfisher also reported tumbling annual profits.

Next said profits fell 14 per cent and warned of a difficult 2009 amid the recession and cost implications of a weak pound.

DIY giant Kingfisher saw profits at B&Q in the UK slump by £25m as it was hit by sliding sales of kitchen and bathroom ranges.

However, the ONS figures suggested food stores are faring marginally better, with sales volumes dipping into negative territory by 0.3 per cent month-on-month and 0.6 per cent compared with February 2008.

By value, food stores sales rose 4.9 per cent compared with a year earlier in another indication of higher food prices.

Inflation data earlier this week showed a surprise hike in February, largely as a result of higher food and drink prices.

Retailers have been increasing price tags to offset higher import costs due to the weak pound, which is seeing consumers pay significantly more for goods such as vegetables.

Economists said the ONS data for February was more reflective of the tough conditions being faced by British retailers, coming after a run of unexpectedly high results.

Sales rose by 0.8 per cent in January, driven by cut-price clearance activity.

But experts warned of worse to come.

James Knightley, economist at ING, said: "We suspect further sharp declines are likely given that unemployment is surging, nominal wages are now falling due to lower bonus payments across the economy, wealth is plunging due to weak equity markets and falling house prices, while confidence is at all-time lows."

There was some good news. Shares in the ailing sportswear chain JJB Sports jumped today as the firm mapped out a new direction for the business after staving off collapse with the £83.5m sale of its health clubs.

Wigan-based JJB, which sold the gyms to founder Dave Whelan yesterday, will relaunch its retail chain with a new range of sports equipment and clothing under the "Serious about Sport" banner.

Shares soared almost 30 per cent after the firm was also granted £50m in working capital from lenders to keep it in business.

But the support will be dependent on JJB striking a deal with landlords under a company voluntary arrangement.

It will look to reduce an estimated annual rental bill of around £15m for 140 stores closed last year, while temporarily switching to monthly payments for its 250 open outlets.

Executive chairman Sir David Jones said: "We have taken the first step in securing JJB's long-term future after months of speculation."

The sale to Mr Whelan was rushed through without shareholder approval under special provisions for companies in severe financial difficulties.

The lenders could still withdraw their support if they are unhappy with the trading performance of the chain or the progress of the CVA agreement with its landlords.