Now that the bulk of the numbers are in, what to make of retail’s Christmas and the outlook for this year?
First, without wearing rose-tinted glasses, the golden quarter was not a complete washout.
A wide variety of retailers did well, from mass-market players such as food giant Tesco and the self-styled ‘king of trainers’ JD Sports, through to newer companies such as pureplay Boohoo and branded specialists such as Joules and Ted Baker.
That said, Christmas was dismal for many retailers. It was, according to the BRC, the worst December performance across the board since the dark days of the recession a decade ago. HMV hit the buffers, Halfords warned on profits and Debenhams’ seasonal sales slumped.
Although particular factors were at play in each of those cases, many will feel that their bruising Christmas experience was reflective of the wider industry and be nervous about what is to come in 2019.
They are right to take nothing for granted. Perhaps the most significant news so far from the seasonal updates was that the John Lewis Partnership may not pay a bonus this year.
The last time that happened was in 1953 – more than half a century ago. Then, there was still rationing of some goods in the aftermath of war, How Much is that Doggie in the Window? was a chart-topper and the Queen’s coronation took place.
It was another world, but the polarised background of post-conflict austerity and optimism accompanying a new monarch have resonance today, particularly in light of the divisive Brexit debate.
“If they do not wish to be hostages to fortune, retailers need to adapt – fast”
While some people hope for a new Elizabethan age of mercantilism, more probably fear the likelihood of hard grind and even the possibility of shortages if ports seize up in the political fallout that could lead to economic slowdown.
John Lewis didn’t say so explicitly, but chair Sir Charlie Mayfield’s message was clear. “The board will need to consider carefully in March… whether payment of a bonus is prudent in the light of business and economic prospects at that time.” Surely a reference to Brexit uncertainty as well as the changing retail environment.
John Lewis was insistent that, should it choose to pay a bonus, it had the “financial strength and flexibility” to do so “without impacting our ambitious investment programme”.
Not all retailers have the same financial strength as John Lewis to invest, and many are grappling with burdensome cost increases such as business rates as well as with whatever Brexit may bring.
If they do not wish to be hostages to fortune, retailers need to adapt – fast.
While fractious political debate casts a shadow, the harsh reality of trading conditions is surely more to do with wider and deeper changes among consumers, which retailers need to reflect and anticipate.
Speed of change
Retail’s Christmas stars were at the top of their game. Tesco was a winner as a result of its ability to cater for all comers, whether premium shoppers or value hunters – strengths on which it was built in the Leahy era and current chief executive Dave Lewis has rebuilt.
JD Sports resisted the discounting that brought low rival Footasylum and carried on doing what it has done for years through in-store excellence, a growing multichannel business and extending its international reach.
Over at Joules and Ted Baker, distinctive design handwriting kept the tills ringing.
Tesco’s achievement is perhaps the most noteworthy, because it has been delivered despite the mess inherited by Lewis when he joined almost five years ago – and because the grocer has not just made up lost ground, but positioned itself to be a more powerful player in future in the wider food market through its tie-up with Booker last year.
Over the same period, some retailers that were in turnaround mode when Lewis joined Tesco remain so now. They cannot afford to be much longer, because the pressure retail is under means speed of change is as essential to success as strategy and execution.