You may barely have packed away your Christmas decorations, but for retailers the final reckoning of the festive season is just getting into gear, with a string of major chains reporting on trading this week.
We will find out who enjoyed jingle tills and where the rancid turkeys lie as Marks & Spencer, Sainsbury’s, Tesco, Greggs and B&M all reveal their figures. Those retailers that kept news of poor trading under wraps last week, in hopes of a last-minute blast by January sales shoppers, may finally have to admit their failings in some unscheduled announcements.
So how are things looking?
For clothing retailers it has been a mixed picture, with Next becoming the top riser in the FTSE 100 on Thursday as it revealed yet another profits upgrade thanks to better than expected trading. On the same day, JD Sports Fashion became the biggest FTSE faller after it issued a profits warning.
Next put its success down to strong online sales, helped by improvements in its distribution network and recovery from last year’s Royal Mail strikes, which had affected home deliveries.
JD, in contrast, blamed high discounting and the mild weather for disappointing sales.
The news from M&S may shed more light on whether this was a case of Next outperforming a tough market or if JD and the sportswear sector are suffering more than others.
JD’s young consumers had been buoyed by wage increases, good work availability and lack of exposure to the mortgage increases and energy bills their parents have been dealing with, but perhaps they have chosen to prioritise holidays or technology over clobber this season.
M&S was among the top FTSE risers in the new year as investors bet on it having had a decent Christmas, with improved affordability on foods and better style in its clothing ranges both looking to have paid off.
Like Next, it is also likely to have benefited from its mix of shops and a slick online presence, which gives shoppers the reassurance – and potential cost savings – of opting to click and collect items from stores rather than have them delivered.
With more spare cash to start with, M&S’s core customers are seen as somewhat insulated from cost of living increases and are therefore potentially less likely to be put off by higher prices.
Certainly, M&S’s online discounts of up to 50% are far lower than the dramatic 80% seen at Boohoo and Asos, or 70% at Superdry and Sports Direct, which suggest tougher times elsewhere in the fashion market.
M&S’s increased presence in the beauty market is also likely to have been good for business, as strong sales figures from Boots last week reinforced hopes of a good season for face creams and cosmetics, perhaps benefiting from a return to socialising and spending on cheap treats.
M&S, which reports on Christmas trading on Thursday along with Tesco, is also seen as a likely winner on food. Clive Black, an analyst at Shore Capital, predicts that M&S food could deliver sales growth of more than 10% as its combination of “Remarksable” value lines and innovative ideas draws in shoppers.
Listed supermarkets Sainsbury’s and Tesco also look to have fared better than their private-equity-owned rivals Asda and Morrisons. Both increased their market share over Christmas compared with a year earlier, with Sainsbury’s looking to be the strongest performer of the traditional supermarkets, according to data released last week by industry analysts Kantar.
Both Tesco and Sainsbury’s – which reports on Wednesday – are likely to face questions, however, on the costs and impact of their heavy investments in loyalty card discounts, which are currently being investigated by the competition watchdog.
Such tactics seem to have protected the UK’s two biggest grocery chains from losing shoppers to Aldi and Lidl, but could in the long term lose them the sort of drop-in shoppers who are not keen to sign up to a complicated loyalty scheme just to get a decently priced pint of milk.
Also snapping at their heels is discounter B&M, another big riser as investors returned to business after the festive break. It reports on Tuesday, and is likely to have benefited from the demise of rival Wilko in the final weeks of the year.
