Mulberry's new Regent Street flagship store

LONDON — Retailers are unveiling their Christmas windows this week and hoping for a lucrative season, but in a record year for retail failures, shop closures, layoffs and restructuring, the outlook is far from rosy.

On Wednesday, Mulberry said in its interim results that the key third quarter had gotten off to a sluggish start: domestic like-for-like retail sales were down 7 percent in the six weeks to Nov. 3, against a challenging backdrop in the U.K., which generates 68 percent of Mulberry’s sales.

Mulberry, which saw its first-half revenue drop 8 percent to 68.3 million pounds, was also the victim of British retailer House of Fraser’s collapse and immediate repurchase by Sports Direct boss Mike Ashley last summer.

Mulberry had 21 concessions at House of Fraser and said in an August profit warning that it had incurred exceptional costs from HoF’s collapse and is owed millions by its new owner. As a result, Mulberry’s losses widened in the first half to 5.3 million pounds.

Mulberry is not alone: According to a report in The Telegraph on Sunday, Ashley’s purchases of distressed companies, including HoF, Evans Cycles and Agent Provocateur, have meant the loss of some 6,000 jobs and more than 1 billion pounds in unpaid bills.

Despite the slow start to the key third quarter, Mulberry said it remained focused on growing its international business and that it was “well-positioned for the Christmas trading period, which, as ever, will determine our full-year result.”

Fellow British retailer Marks & Spencer, which has also reported a decline in first-half sales, said trading conditions in the U.K. remain challenging, while “the headwinds from the growth of online competition and the march of the discounters remain strong in all our markets.”

The company said that as it cuts costs, shuts stores and rejigs pricing, it expects to see “little improvement in sales trajectory” for the full year, which ends in March.

Retail lobby group the New West End Co. sought to manage Christmas trading expectations on Wednesday, saying retailers would experience “a marginal drop in spending” across the West End in 2018 compared to 2017, when they benefited from the favorable exchange rates following the post-Brexit referendum drop in the pound.

“Despite Brexit uncertainty and low consumer confidence, which has left consumers holding back on spending this year, retailers are hopeful for a positive end this Christmas to what has been a challenging year for trading,” said the organization, which lobbies on behalf of 600 businesses in and around Bond, Oxford and Regent Streets.

The New West End Co., which is projecting that 2.5 billion pounds will be spent over the eight-week Christmas trading period, went on to say that the challenging trading environment has made for a buyers’ market, and has forced retailers to pull out the stops to entice shoppers into the West End this Christmas.

The New West End report came on the heels of a grim retail sales update by the British Retail Consortium and KPMG. Earlier this week, those organizations reported that U.K. retail sales in October increased 0.1 percent on a like-for-like basis compared with last year, when they had decreased 1 percent year-on-year.

Paul Martin, head of retail at KPMG, said October kicks off “the all-important golden quarter, with some retailers earning the majority of their annual profits in these months alone. But with October’s like-for-like sales flatlining at 0.1 percent, it was a bit of a non-starter.”

He said demand was mainly dampened by continued economic uncertainty, as well as by the anticipation of deep discounting ahead, especially now that Black Friday weekend has become such a permanent feature on Britain’s retail calendar.

The most optimistic high street retailer is Primark, an outlier in the land of crumbling brick-and-mortar franchises.

On Tuesday the company, a division of Associated British Foods, reported a 6 percent uptick in sales to 7.48 billion pounds, and it remains relentlessly upbeat about sales in the coming months.

While most of the big chains are closing and downsizing stores, Primark said that in the current 2019 financial year it plans to add more than 1 million square feet of net additional selling space with a net 15 new stores.

Germany, France, Spain and the U.K. will see the most space added, with new premises planned at Birmingham Pavilions in the north of England. At 160,000 square feet, the new space will become Primark’s largest store in the world.

Primark has already opened large, new stores in Berlin, Toulouse, Seville and Almeria in Spain. Other units set to open later in the year include Bordeaux, Brussels, Utrecht and Milton Keynes in the U.K.

Primark’s first store in Slovenia will open in 2019 in Ljubljana, and it has signed the lease on its first store in Warsaw, Poland. The company said its plan is to move into central and eastern Europe over the coming years.

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