Christmas cheer on the high street
Jan 13, 2012
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December delivered a positive surprise for the retail sector. According to the British Retail Consortium (BRC), overall sales grew by an annual 4.1% in December and like-for-like sales (at outlets open for more than a year) grew 2.2%, the best figure since April’s royal wedding-induced jump. Among this year’s standout performers were John Lewis, which managed a record week in mid-December, and Debenhams, where flat like-for-like sales in the 18 weeks to 7 January exceeded expectations.
Marks & Spencer suffered its first fall in clothing and home furnishings for three years, but strong food sales ensured overall like-for-like sales growth of 0.5%. Sainsbury’s and Wm Morrison respectively saw underlying sales growth of 1.2% and 0.7% over the Christmas period. Tesco lost market share.
What the commentators said
December was “better than hoped for”, said the BRC’s director-general Stephen Robertson, but it doesn’t foreshadow a revival in the sector. Results were boosted by some “major one-off factors”. A weak December 2010, owing to the snow, flattered the annual comparison, while “discounting was deeper and started earlier”, which threatens stores’ margins. With consumer confidence in the doldrums and the squeeze on real incomes continuing, 2012 is likely to be just as tough as 2011. Nobody expects “this level of demand to be indicative of the year ahead”, agreed Helen Dickinson of accountants KPMG.
A closer look at the figures supports this caution. Shaky consumer confidence ensured that sales of big-ticket items, such as furniture, continued to suffer. It also hit non-food sales in general, but solid food sales at Marks and Spencer and Sainsbury’s comparatively solid result appear to confirm predictions that people “would defy austerity with small treats”, as Jonathan Guthrie put it in the FT. “The broad impression is of grocers scrabbling for temporary advantage through price promotions in a stagnant market.” As far as the supermarkets – and retail in general – is concerned, Christmas “has thus set the tone for 2012”.
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