Recent major headlines in retail occurred on the same day, when Marks & Spencer and Primark both revealed their latest trading results, giving an up-to-date picture of the current state of play in the marketplace.

Recent major headlines in retail occurred on the same day, when Marks & Spencer and Primark both revealed their latest trading results, giving an up-to-date picture of the current state of play in the marketplace. The two sets of numbers were like chalk and cheese, underlining the vastly greater differences today’s market imposes between the winners and the also-rans.

In fact, it was almost like hearing about two totally different markets. However, one part of the picture that was exactly the same came from the two leadership teams and their views of consumer economy recovery. Both said that, while confidence appears to be growing, it has yet to translate into increased demand.

So what does this mean for Christmas trading? The battle for sales has begun in earnest - the very expensive ads that are now appearing tell us so. It is always a very moot point exactly what is and what is not Christmas business.

For better or worse, I have always used the month of December as a proxy.

While increased confidence is certainly taking time to percolate through to the tills, I think December sales will top £40bn for the first time ever. A year-on-year increase in consumers’ retail spend of about 4% will take the total to around £40.5bn, ending 2013 on a considerably more positive note than it began. The year-on-year numbers will be helped by last year’s relatively weak comparatives. It will be that, rather than any end to austerity, which will help produce a reasonably good trading season.

The Christmas trading period has always been key for retail. December delivers about 12.5% of the year’s total revenue and this has been pretty much the case for decades. Its importance obviously varies by sector - in clothing it is closer to 15% and in food a little above 10%.

What has changed is that with margins far tighter than they used to be, relatively small shifts in Christmas trading market share will impact profitability far more than they used to. And with retail cost inflation generally running ahead of sales this is even more of an issue.

Stock levels are always a huge preoccupation. I continue to believe that, in general, the majority of retailers offer too many product options in the mistaken belief that this equates to choice. Today it is more vital than ever to know exactly what customers want and avoid stocking what they don’t. At Christmas a lack of clarity in the product offer can be ruinous.

Everyone needs to clear some excess stock in January, but the volume and markdowns needed to turn it into cash will, as always, be the acid test of performance and determine margins.

The positive talk of recovery may well have seduced some retailers to buy more stock, anticipating a stronger consumer reaction to economic news. Very mild weather until relatively recently in the autumn season may also have left stock levels higher than wanted.

On balance, I think Christmas trading will look quite good at the top line, and this will be reflected in trading statements in January. Later on, when the audited figures take account of markdowns, the picture may well look rather less positive, but importantly still a clear improvement on last year.

  • Richard Hyman president, PatelMiller