FSA Warns Retailers To Report Sales Downturn

Tne Financial Services Authority has warned retailers that they must advise the City of any downturn in trading during pre-Christmas sales as soon as possible. The City regulator has told retailers chief executives of FTSE 100 and FTSE 250 retailers that they must not wait for the traditonal Januarytrading statements if December sales are below expectations.

FSA's market division director Huey Evans wrote:"Should a company's trading performance over December besubstantially below expectations but the company believes that, by taking remedial action to increase its sales and/or reduce the cost of sales in January, that it will be able to meet expectations for its year end, the poor trading performance for December should still be announced without delay."

The letter also warned that the size of any price movement that might result is not relevant, specifically warning against a 10 per cent rule-of-thumb guide often used. Any changes to a trading strategy or business model that might affect the share price should be announced immediately. Huey Evans said: "An example of this might be a decision to embark upon a long-term strategy of price reduction."

The letter said: "The UK Listing Authority recognises that trading performance over the Christmas and new year period is particularly important for retail companies. We therefore feel it may be helpful to remind companies of the need to ensure compliance with the continuing obligations under the listing rules at this time."

The letter, sent to leading retailers including Tesco, Marks & Spencer, GUS, Sainsbury's, Boots and WH Smith, is likely to increase tensions between the retail sector and the City. Many retailers have complained about the City's short-termism, with analysts expecting consistent sales increases regardless of seasonal or cyclical changes in trading.

The City's sometimes unreasonable expectations have been cited by a number of retailers which have exited the stock market to go private over the past two years. Those no longer listed include Selfridges, Debenhams, Harvey Nichols and DFS.