Christmas is over and many retailers’ hangovers were often less painful than anticipated, but was it really better than expected? Charlotte Hardie reports.

The media was, as always, ready to pounce. Good results, bad results, catastrophic results… retailers’ Christmas performances are always headline fodder. And this year was no exception – Tesco’s disastrous results being the most notable example. But now that the numbers have all trickled in, what can be deduced from what many feared might be a particularly underwhelming golden quarter?

There have been casualties, certainly, but there was no bloodbath, as the results summary compiled by strategy consultancy OC&C shows here. In fact, many retailers reported surprisingly strong sales. Poundland was among them – the single price retailer reported like-for-likes up 5.9%, with a 24.9% rise in total sales for the five weeks to January 1. Chief executive Jim McCarthy says: “The fact of the matter was, it was better than we expected.”

But retailers know this is not a sign they can relax. Aside from a trading climate that remains resolutely tough, there are several factors which need to be taken into account when digesting the detail from this year’s Christmas results. First, the numbers in isolation mask the fact that some retailers had some fairly easy targets to hit. This time last year, retailers had to contend with the bad weather that further hindered their festive fortunes.

“These are sales figures. Just to hit this figure, many retailers will have had to discount heavily. When a lot of them reveal their full or half-year profit numbers, we’ll see that a lot more damage will have been done,” says OC&C partner Tom Gladstone.

The reporting period is another point to bear in mind. As Conlumino managing director Neil Saunders points out, it’s notable that several of those towards the bottom have longer reporting periods. “December was better than expected, but it did follow very weak months of October and November. December was an exception, rather than a return to growth in retail,” he says.

The stronger than anticipated sales in December also reflect the fact that the Christmas spend came late. This seems to have been a trend every year of late, but arguably this year for retailers it felt even later than usual.

Festive shoppers are becoming ever wiser. They know the longer they leave it, the more bargains there are to be had. Gladstone says this year’s plethora of last-minute spending sprees fitted with a survey OC&C carried out with 1,000 consumers before Christmas – 15% of whom said they didn’t normally wait until the discounts were marked up before they hit the shops, but that this year they would.

One notable trend to emerge from this year’s festive quarter was the polarisation of premium brands and those at the value end. Both fared better than those occupying the middle ground. At the luxury end of the premium spectrum, sales at Mulberry and Burberry soared.

Meanwhile Supergroup and House of Fraser – not in the same price bracket, but nevertheless boasting a reputation for quality – also fared extremely well. As Gladstone says: “For these shoppers, austerity was not for Christmas, but it will be back with a vengeance in the new year.”

Premium credentials

House of Fraser ecommerce director Andy Harding says its commitment to highlighting its premium credentials contributed to its success. Amid the maelstrom of discounting, the retailer made a concerted effort to demonstrate value, but not discount too much.

Instead, the focus was on giving people a reason to spend there – that could, for instance, be in the way they merchandised product. “It can’t just be a price discussion. Whenever you offer a message about price, you need to do something more,” he says. “When it’s a blur of discounting it can become meaningless to shoppers.”

Waitrose is another premium brand that also delivered a strong set of results. The grocer’s store sales like-for-likes were up 3.8%, for the four weeks to December 31.

Managing director Mark Price says its strong performance was the continuation of a really strong year for the grocer, and says it focused on two priorities – the first was to make Waitrose more accessible on price in terms of Essential Waitrose products and brand-matching prices against Tesco.

But Price also points out the importance of offering more than just an attractive price tag.

The grocer’s other priority was to “give customers really special, unique products”. That meant working with Heston Blumenthal, Delia Smith and its suppliers. “Christmas is a very special time – families want to entertain and look after people,” says Price.

But also jostling for position in the top half of the Christmas performance table are names such as Poundland, Matalan, Perfume Shop and Original Factory Shop. Just as people were prepared to splash out, they were equally prepared to trade down for the right product. McCarthy says: “In terms of product, people were determined to have a really good Christmas. If you could combine amazing value with things people wanted to buy, you did all right. Value, service and availability made all the difference.”

Focus on value

So this year was all about value for money – but importantly, that is irrespective of the price point. Ultimately, says Price, “it doesn’t matter whether you’re at the top or bottom end of the market. Buying a Heston Christmas pudding, for instance, is brilliant value. £12 is a lot of money, but you’re getting a unique product designed by Heston Blumenthal”.

By and large, the middle ground found the going tougher – particularly in terms of store sales. The difference in performance between store and direct sales at some of the biggest names on the high street – among them Marks & Spencer and Next – is very apparent.

The biggest retailers are just as exposed as the smaller players, but the results do indicate that a strong multichannel strategy can be a saviour. This is particularly apparent with Next’s contrast in fortunes between its store like-for-like sales, which were down 2.7% in the 21 weeks to December 24, and its internet and direct like-for-like sales, which were up 16.9%.

House of Fraser has been focusing attention and resources on boosting its multichannel offer – most notably with the launch of two designated click-and-collect stores this year. “There was some element of trepidation about how they’d perform, but it was really good and they also opened up new markets in those towns,” explains Harding. What’s more, the retailer’s website was relaunched last summer, with the aim to improve navigation around the site, and maximising online marketing opportunities. 

The stream of Christmas results highlighted more than ever the importance of standing out from the crowd. The fact that some specialist retailers fared well is also proof of this. Among them were Pets at Home and Majestic. While they sell products that can be found at many of the large supermarkets, they still attracted spend because they offer something different to shoppers.

At the other end of the spectrum, those retailers with challenged business models were particularly exposed. Among them, says Saunders, is HMV and Game – whose markets are becoming increasingly digitalised – and Thorntons. “It’s trying to be a retailer, manufacturer and wholesaler in one,” he says. 

So that’s it for another year. It was a tough build-up, on the back of a year of sliding consumer confidence, but many retailers will be feeling optimistic. McCarthy puts it into perspective: “Retailers knew it was going to be tough. It’s quite an achievement for any retailer to have positive like-for-likes.”

Now, though, it’s all eyes on 2012.