Last-minute shopping rush lifts retailers’ seasonal performance but at what cost to margin?
Top retailers breathed a sigh of relief after a last-minute Christmas shopping rush, although there are fears that some will have paid a margin cost in highly promotional trading conditions.
While some retailers hit the buffers in December and others are only likely to have had a successful Christmas by the skin of their teeth, leading groups traded comparatively well and multichannel operations were key to success.
Bellwether retailers John Lewis and Next both delivered sales uplifts over the Christmas period and flagged the importance of their multichannel models.
John Lewis recorded a like-for-like sales rise of 6.2% in the five weeks to December 31, which it hailed as an “outstanding performance”. Online sales surged almost 28% in the period.
Next’s sales rose 3.1% between August 1 and December 24, when its Directory business outperformed stores. While retail sales fell 2.7%, Directory sales rocketed 16.9%.
John Lewis buying and brand director Peter Ruis said the Christmas rush had come about 10 days later than usual. Despite price-matching rivals, he said: “Our margin in December was comparable to last year.”
Next chief executive Lord Wolfson said the retailer had a strong final week before Christmas, but that overall November and December sales had been disappointing. “It made December look OK but it wasn’t the bounce we were expecting,” he said. Next did not go on Sale early and he highlighted discounting by rivals as having possibly affected shops’ takings.
Other retailers also said they were pleased with their seasonal showing. Aurora reported like-for-like sales in the five weeks ending December 31 up 13% while gross profit increased by 9.2%.
Chief executive Mike Shearwood said Aurora too had benefited from its multichannel business. “While the environment continued to be challenging with store footfall down on last year in the run-up to the peak period, Aurora saw a significant increase in online sales,” he said.
Toy retailers were pleased with their Christmas performance. Hamleys head of retail and marketing Nigel Wheatley said it had recorded positive like-for-likes as a result of “smoother” operations, reduced queues and in-store entertainment. “It wasn’t easy,” he said.
The Entertainer managing director Gary Grant said the retailer had performed “really well” over Christmas, finishing the year with like-for-likes up 2%.
BDO head of retail Don Williams said overall Christmas sales looked as if they would be strong but feared heavy discounting would have hit margins in some cases. He thought post-Christmas sales had been weaker than last year’s.
BRC director-general Stephen Robertson observed of the post-Christmas period: “Retailers have to turn the stock they have into cash but the big question is how much margin those price cuts left.”
Retail trading looks unlikely to improve much in the coming year. Ruis said: “We had a good Christmas but we’re not in the dark about how difficult it is for the consumer right now. It won’t be great for retailers in the run-up to Easter.”
Wolfson said: “It’s going to be another year of walking up the down escalator.”
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