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For retail this was a Christmas with many changes

Kirsty Brown | 16/02/2015
Filed under: growth, retail, Christmas

The first change was positive one in that, for the first time since 2008, consumers entered the festive period with a slight growth in their disposable incomes and with a more confident outlook on the economy. This, coupled with lower fuel prices and deflation in the grocery sector, meant that many people had a little more to spend and were willing to spend it. While consumers did not go crazy, they spent more on gifts and showed a greater willingness to buy more premium items in food and in fashion. This trend saw retailers like Fortnum & Mason (like-for-like festive sales up 18.3%), Ted Baker (+22.8%) and House of Fraser (+8%) do well over Christmas.

The other big change, of course, was in when spending was made. The impact of Black Friday – which fell at the end of November – was massive. Although many retailers saw big sales spikes on Black Friday it is now clear that some of this came from sales brought forward from December and the weeks closer o Christmas. As a result, although December trade was positive it was not quite as strong as initially anticipated. This shift was evident in the BRC retail sales figures, which saw total sales in December rise by just 1% after a stronger increase of 2.2% in November. It was also borne out in the fact that John Lewis, like many other retailers, had its biggest grossing week around Black Friday when £179.1m was taken, eclipsing even the week before Christmas, which is, traditionally, the highest sales week of the year.

One of the consequences is that many retailers have weakened their margins and profitability by selling high volumes of stock at a discount.

While some retailers were celebrating sales spikes, the grocery sector went into Christmas on a flat note and didn’t change its tune. Growth in grocery was virtually non-existent and, as a result, it looks like the main players have suffered a further weakening of sales. On a like-for-like basis, Morrisons’ sales fell 3.1%, Sainsbury’s fell by 1.7% and Tesco’s by a slightly better than anticipated -0.3%. The good news from the sector is that outside of the middle part of the market, the discounters and higher end retailers like Waitrose, where like-for-like sales increased by 2.8% over Christmas, did well.

So, this Christmas delivered a mixed bag of fortunes for retail with winners and some big losers. We expect this pattern of polarised performance to be something that continues well into 2015.

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