Toughest Christmas in a decade for UK retailers
Retail sales were flat in December, usually a bumper month for shopping. It was the worst performance since 2008, the depths of the financial crisis. Even price cuts failed to encourage shoppers.
The weakness was reflected in sales figures from the major retailers. Debenhams reported a 5.7% fall in like-for-like sales in the 18 weeks to 5 January, while John Lewis said its annual bonus to staff may be under threat. Tesco defied the wider market, but M&S saw like-for-like sales falling more than expected.
Ed Monk, associate director from Fidelity Personal Investing’s share dealing service said on M&S: “Food sales were down but the pace of falls has slowed a touch since the half-way stage. Clothing and home sales suffered as fewer shoppers visited stores and a 14% rise in online sales failed to make up the shortfall. Discounting this year was clearly painful for M&S.
“The company insists an overhaul of its clothes and home ranges is at the early stages, but it’s hard not to feel we’ve been here before. Clothing lines have been undergoing makeovers seemingly forever and some 100 stores already been earmarked for closures by 2022.
Share prices higher
In spite of the weakness, shares in some of the major retailers rallied this morning. Fiona Cincotta, senior market analyst at City Index said: “Surprisingly this morning all the supermarket shares are trading higher, even M&S, because overall Christmas sales, though lower, proved to be less bad than many investors have feared.”
Helen Dickinson, chief executive, BRC, said: “Squeezed consumers chose not to splash out this Christmas with retail sales growth stalling for the first time in 28 months. The worst December sales performance in ten years means a challenging start to 2019 for retailers, with Business Rates set to rise once again this year, and the threat of a No-Deal Brexit looming ever larger.
“The retail landscape is changing dramatically in the UK, while the trading environment remains tough. Retailers are facing up this challenge but are having to wrestle with mounting costs from a succession of government policies – from the Apprenticeship Levy, to higher wage costs, to rising business rates. Retail makes up 5 per cent of the economy, yet pays 10 per cent of all business taxes and 25 per cent of all business rates. This is neither fair nor sustainable.”