Big stores stuck with mountains of stock

The Christmas sales have so far failed to ride to the rescue of the beleaguered high street, business experts said last night. After three days of sales, big chains such as Marks & Spencer and Dixons face the possibility of having mountains of unsold stock and a dire start to 2003.

Most industry experts believe the run-up to Christmas will have been a big disappointment. Retailers may have been banking on the sales to rescue them but, as one City analyst said, "Christmas may be a time for miracles, but the UK high street should not expect one."

Marks & Spencer, Next, Hennes, French Connection and other clothes retailers have already suffered from a warm winter, which has hit sales of coats. Dixons, Currys and other electrical retailers have also taken a hit because people are reluctant to splash out on big items, even with the heavy discounts offered in the sales. Other traditional Christmas presents, such as jewellery and toys, are also expected to be down. Only books appear to be selling well.

Despite the usual stories of shoppers camping out in front of stores such as Selfridges, Harrods and Harvey Nichols, analysts remain to be convinced that sales shopping will be converted into big profits.

Full figures will not be available for some weeks, but the early signs are not good. The UK consumer behaves very much like the US consumer, and shopping across the Atlantic has been cautious in the pre-Christmas run-up. A burst of activity just before the 25th was said by Wal-Mart, the world's biggest retailer, to be "too little, too late".

In the UK, the consumer analysts FootFall predict that, when fuller data emerge in January, it will be shown that pre-Christmas trading was down by 7 per cent on the same period in 2001.

Faced with stocks they cannot shift, retailers have done everything they can to get the ball rolling. Many stores – including Marks & Spencer – began to discount stock before the 25th and opened their doors earlier on Boxing Day. The discounts themselves are bigger than in previous years.

Boxing Day gave the high street at least some cause for cheer. Debenhams, Selfridges and Next reported a "busy" start to their sales, and spokesmen for big shopping centres such as Bluewater in Kent and the Trafford Centre near Manchester said the malls were filling up with bargain hunters. Early figures from FootFall confirmed people were out in force, with numbers up by 8.6 per cent on 2001.

But the number of people going to the sales reveals nothing about how much is being spent, and economists are worried about last week's plunge in the UK consumer confidence index.

As the prospect of a war in Iraq has increased, and key indicators such as the price of crude oil have soared, British shoppers have become more likely to hold back from making big purchases. Consumer confidence has slipped to its lowest level since 11 September 2001, in the sharpest drop since the fuel crisis of 2000, which brought the country to a standstill. Economists are also waiting for figures out this week that will reveal levels of consumer credit, likely to show Britons holding back.

In the City, most investors think the high street cannot resist the economic trend any longer, and that this year's sales will prove it. "The more fantastic bargains you hear about, the more worried shops should be," a senior retail analyst said. "We have become bear-market shoppers."

The problem has been on the horizon throughout 2002. With financial scandals breaking, markets crashing, war looming and thousands of City jobs being cut, economists have had their eyes glued to the behaviour of the British consumer, praying shoppers would not lose their nerve.

* Credit card companies yesterday announced plans to pool information in an attempt to stop personal debt running out of control. From the new year, lenders will share more details about customers, including payment arrears and how quickly they settle bills.