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Tablet PCs, cheap fashion lift UK retailers

By James Davey

LONDON (Reuters) - Trading updates from six major British retailers on Thursday demonstrated that the must-have gadget, cheap fashion and internet sales were key to overcoming an otherwise tough Christmas.

Consumer spending generates about two-thirds of Britain's gross domestic product, but job insecurity and a squeeze on incomes has put shoppers under pressure, which in turn has given retailers a rough ride, pushing music retailer HMV, camera store Jessops and DVD rental firm Blockbuster into administration over the last week.

But Thursday revealed a few bright spots, with Dixons Retail, Europe's second largest electricals retailer, selling five tablet PCs a second in the week before Christmas and beating analysts' forecasts with a 3 percent rise in group like-for-like sales.

"This Christmas everybody wanted a tablet," Chief Executive Sebastian James told reporters.

In the 12 weeks to January 5, Dixons' fiscal third quarter, the firm sold "well over 1 million" tablets, he said, with Apple iPad, Samsung Galaxy and Google Nexus the most popular lines.

Though gross margins fell, Dixons said it would meet year profit forecasts.

Argos owner Home Retail, which in October unveiled a plan to reposition its catalogue-led business to a mainly online operation, raised its year profit forecast, pushing its shares up 15 percent.

Argos, which also saw strong demand for tablets, posted better-than-expected third quarter like-for-like sales growth of 2.7 percent.

Shares in Home Retail are among those being heavily shorted, according to data published by Britain's Financial Services Authority, so some fund managers will be staring at hefty losses today.

CHEAP FASHION

While Marks & Spencer, Britain's biggest clothing retailer, posted a weak Christmas trading update last week, cheap online fashion retailer ASOS posted on Thursday another stellar trading performance over the Christmas period.

The company, which targets young women looking to emulate celebrity fashions on a budget and has even clothed U.S. First Lady Michelle Obama, said UK sales climbed 34 percent year-on-year in December, while international sales jumped 47 percent.

A higher-than-expected 25 percent increase in sales at discount fashion retailer Primark also underpinned a 10 percent rise in group sales at owner Associated British Foods[ID:nL6N0AM32P]

Bargain-hunting consumers also drove a 3.1 percent rise in third-quarter like-for-like sales at Booker, Britain's biggest cash-and-carry wholesaler.

But Mothercare, the baby and maternity products retailer, remained a laggard despite a change in management last year. Its UK like-for-like sales fell 5.9 percent in the third quarter and its shares fell 4 percent.

Official data for British retail sales will be published on Friday.

(Reporting by James Davey, additional reporting by Neil Maidment, Kate Holton, Paul Sandle, Helen Massy-Beresford and Brenda Goh; Editing by Will Waterman)

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