Lidl has warned of potential price rises, with HMV predicting job cuts as a result of cost increases caused by the UK government’s budget.
Doug Putman, the owner of the British entertainment retailer HMV, said the budget was “bad news in general” and “most retailers would be on a pause” in their expansion plans as the cost of employing staff rose. “We won’t open, we will wait,” he said.
“I would be surprised if we could find a way to get through this without cutting jobs,” he added. He said retailers took on extra staff for Christmas and often kept some on permanently, but the industry was “probably not going to see as much of that this year”.
Putman said the budget increase in national insurance contributions for employers would mean a seven-figure cost for the business, on top of another seven-figure cost due to a rise in the minimum wage from April. However, he was still hopeful that HMV would achieve a small rise in sales this year as vinyl and CD sales were doing well compared with some other sectors such as fashion or toys.
Ryan McDonnell, the boss of the German-owned discount grocer Lidl’s UK arm, said the supermarket was also trading well in the run-up to Christmas as it was winning over shoppers from all its rivals during tough economic times. However, he warned that “inevitably there has to be some level of inflation on products” as the result of the NIC and minimum wage increases.
The warnings came after large UK retailers including Tesco, Boots, Marks & Spencer and Next wrote to the chancellor, Rachel Reeves, to say that a £7bn increase in annual costs after last month’s budget would lead to job cuts and higher prices.
McDonnell called for the government to urgently reform the business rates system, the property-based tax that means extra costs for high street outlets compared with their online rivals, in order to “inspire more growth”.
Lidl’s UK business has bounced back into profit after it slowed expansion in favour of improving existing stores, spurring a jump in sales to almost £11bn.
The discounter, which is close to overtaking Morrisons to become the UK’s fifth-largest supermarket, said it had gained more than 300,000 new shoppers, and 60% of Britons visited the chain at least once year.
Profits rebounded to £43.5m in the year to February 2024, up from a £75.9m loss the year before, as the group cut back investment. It opened just one net new store, according to the accounts, compared with 45 in the previous year.
The grocer notched up an almost 17% jump in revenues last financial year, to £10.9bn. Lidl said its growth was driven by significant investment in upgrading stores, with more fridges to improve product freshness, expanded ranges and competitive prices as well as a 24% rise in users of its loyalty scheme.
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McDonnell said: “Now, 60% of households are choosing to shop at Lidl, and they’re coming back more frequently, which is a fantastic sign of increasing loyalty. We have great momentum and, although our ambitions have no ceiling, we won’t rest on our laurels.”
McDonnell also said that men were buying more from its middle aisle of unusual, limited-time stock, from toys to thermal underwear. “We often get partners at odds with each other because men have disappeared up the aisle and are buying things they maybe already have,” he told the BBC.
Lidl said its strongest growth came from fresh produce, where sales rose 22%. Bakery sales also increased strongly, making Lidl the second largest retailer in the category, ahead of much bigger chains including Asda and Morrisons.