Aug. 9, 2011, 8:03 a.m. EDT

U.K. riots add more gloom to retail woe

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By Kathy Gordon

LONDON -(MarketWatch)- Retailers, already under pressure from the consumer downturn, face mounting costs after a third night of rioting and looting caused extensive damage across London and several other major U.K. cities.

The riots, ignominious for the stark images of burning buildings and looters queueing to try on stolen trainers, have escalated since Saturday, affecting mobile phone shops, fashion stores such as Hennes & Mauritz AB (HM-B.SK) and Debenhams PLC (DEB.LN),electrical retailers Curry's and Comet, and a raft of other stores.

"We are keeping stores closed in areas affected by the riots, to ensure the safety of our staff and customers," H&M spokeswoman Emilsson Falk said. "We continue to monitor developments closely and follow all police directives," she said, adding that it is too early to assess damages and costs at this point.

British Retail Consortium Director General Stephen Robertson Monday condemned the attacks, adding that "clearly with high streets under pressure anyway, at least some of the businesses destroyed will not be able to re-establish themselves, causing long-term damage."

The U.K. consumer has significantly reined in spending on discretionary items, as inflation on essentials like food and fuel sap monthly budgets, and government austerity tax rises and job cuts conspire to further depress consumer confidence.

The retail trend for the last six months has largely been of unrelenting gloom as sales have stalled and several big name retailers have slipped into administration.

None of the affected companies have early indications of the likely cost of the damage and loss of stock, but the Association of British Insurers estimates the cost to insurers will run into tens of millions of pounds.

Shares in some of the affected retailers fell in morning trade with Debenhams and Curry's owner Dixons Retail PLC (DXNS.LN) dropping over 8%, although most stocks later regained ground along with the broader market. At 1122 GMT, Debenhams was down a penny at 571 pence, Dixons was flat and Carphone Warehouse was up 1.71% at 356 pence, up from a morning low of 321 pence.

In Clapham Junction, south London, the Debenhams department store remained closed Tuesday after being ransacked, while the company worked with the police in their investigations.

Dixons Operations Director Sebastian James said in a post on twitter Tuesday that 23 of its stores were affected on Monday while rival electricals chain Comet, owned by Kesa Electricals PLC (KESA.LN), said 10 of its stores were hit during the three nights of rioting.

Mobile phone stores have been particularly targeted for their small, high-value items with 20 stores owned by Everything Everywhere, the joint venture between France Telecom's (FTE) Orange and Deutsche Telekom AG's (DTE.XE) T-Mobile, and eight Telefonica (TEF.SA)-owned O2 stores hit.

Carphone Warehouse confirmed that a number of stores had been damaged, but said all the phones sold in its stores can be blocked or tracked "and we are working closely with the police with their enquiries."

A spokesman for O2 said the company had closed some of its stores Tuesday of its own volition rather than on the advice of the police.

Vodafone was not immediately available for comment.

Prime Minister David Cameron, forced to return early from his holiday in Italy to host a meeting of the government's emergency committee, Cobra, said all police leave had been cancelled, and there would be 16,000 officers on the streets of London Tuesday night, compared to 6,000 the night before.

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