Britain’s retailers suffered their worst Christmas trading since the depths of the global financial crisis, with heavy price cutting failing to persuade worried customers to splash out.
Retail sales data compiled by KPMG with the British Retail Consortium estimated that sales were flat in December against an increase of 1.4 per cent in the same month the year before, the worst performance in December since 2008.
“Squeezed consumers chose not to splash out this Christmas, with retail sales growth stalling for the first time in 28 months,” said Helen Dickinson, BRC chief executive. Paul Martin, head of UK retail at KPMG, said that “desperate” attempts to generate sales through discounting were “seemingly not enough to encourage shoppers”.
The BRC does not reveal which retailers contribute to its figures, but analysts believe they broadly reflect the composition of the lobby group’s membership — implying a degree of bias towards low-growth, high-street operators. They are not thought to include data from big online retailers such as eBay and Amazon, even though Amazon is now a BRC member.
The tough environment was underlined by a rush of trading updates on Thursday from John Lewis, Tesco, Marks and Spencer, Debenhams and Halfords. Data from payments provider Barclaycard also showed consumer spending growth falling behind inflation.
John Lewis staff bonus at risk
Employee-owned John Lewis said it might have to axe its staff profit share— for the first time since 1953 — after it confirmed profits would be substantially lower this year.
Charlie Mayfield, John Lewis chairman, said: “Two main factors are affecting the retail sector — oversupply of physical space and relatively weak consumer demand.”
Sales at the John Lewis department stores were up 1 per cent year on year during the seven weeks to January 5, while Waitrose sales rose 0.3 per cent, excluding fuel.
The group said, however, that “we continue to expect full-year total partnership profits to be substantially lower this year, driven by slower sales growth over the year and margin pressure in John Lewis & Partners along with higher costs”.
M&S festive sales drop 2.2%
Marks and Spencer said its same-store sales were 2.2 per cent lower than last Christmas, with weak sales in clothing and homewares being countered by a slightly better than expected performance in food.
The group left its full-year profit forecasts unchanged, but its shares fell 1 per cent in early trading on Thursday.
For the 13 weeks to December 29, same-store sales were down 2.4 per cent in clothing and home and 2.1 per cent in food, for an overall decrease of 2.2 per cent. Total UK sales were down 2.7 per cent, reflecting the group’s ongoing store closure programme.
Online sales rose 14 per cent and now account for 22.5 per cent of the total, driven by improvements to the website and investment in logistics. The company also finished the Christmas period with less stock needing to be marked down in the end-of-season sales.
Tesco warns of ‘challenging’ environment
Tesco was a relatively strong performer among UK retailers, but nonetheless said that the trading environment was “challenging”.
Dave Lewis, Tesco chief executive, said: “The shopper is behaving as he or she always has, they are savvy, they know what good value is . . . for sure there’s definitely a challenging environment out there, but our job is to keep focused on how we can serve them better whatever the circumstances.”
The grocer said like-for-like sales over Christmas rose 2.2 per cent in its UK stores compared with the same period last year. Its growth over the third quarter was much weaker, however, at just 0.7 per cent.
Tesco shares rose 2.4 per cent on Thursday morning.
Debenhams falls back on discounting
Debenhams said trading continued to be volatile, pushing its Christmas sales down 3.4 per cent.
The retailer — which saw its share price fall almost 90 per cent last year after warning on profits three times — had hoped a more “innovative” and “premium” approach to gifts would lead to a marked improvement on holiday trading figures compared with the previous year.
But it said there was “clear evidence that our customers have been seeking out promotions” which meant it reinstated some “tactical” discounting, cutting into its profit margins. Debenhams shares fell 4.3 per cent.
Shares in Halfords, which sells cycles, and car and cycle accessories, plunged 25 per cent on Thursday morning after it said “consumer confidence could remain weak into next year”. The group cut its forecast for full-year profits.
Barclaycard data reveal drop in spending
Data from payments provider Barclaycard showed consumer spending in the month to December 22 growing 1.8 per cent year on year — less than the growth in consumer prices. Spending in pubs was up 12.9 per cent and in restaurants it rose 9 per cent.
In contrast, spending on clothes fell 3 per cent and spending in department stores was down 6.3 per cent. Esme Harwood, a director at Barclaycard, said: “Many Brits were more modest in their approach to Christmas spending compared to 2017, cutting back on the essentials to balance the costs of the festive season.”
The Barclaycard data omit the two busiest shopping days before Christmas, December 23 and 24, but supermarket groups have reported similar trends across the entire festive period. J Sainsbury and Wm Morrison both commented that consumers were being increasingly cautious, while German discounter Aldi’s sales growth was less rapid in December 2018 than in the same month a year ago.
Ms Harwood said the group’s survey of roughly 2,000 individuals indicated the reticence was likely to persist. “Many shoppers are anticipating price increases over the next three months, particularly around the cost of fuel, household utilities and groceries,” she said.