To assess their track record, Charlotte Dennis-Jones trawls through the archives from this decade to find out just how accurate they are.
Retailers faced formidable obstacles in the first year of the millennium – excessive price deflation, floods, rail chaos and petrol shortages – all of which led many retailers to forecast a gloomy Christmas.
Nevertheless, many analysts were still optimistic. Nick Bubb, then analyst at SG Securities, said: “The picture doesn’t look as bad as the gloom mongers have been saying.”
And by the second week in December, Verdict forecast a 3.2 per cent year-on-year sales rise for the month. In the new year, one analyst was quoted saying he thought Marks & Spencer would post poor results and that Next and Matalan would do well.
It looked like pessimists’ worst fears were coming true, but at the last minute shoppers hit the high streets in their droves. Phenomenal new year Sales followed. Many retailers said they had never seen so many shoppers in the January rush. In the end, the BRC/KPMG figures revealed a 3.4 per cent uplift in like-for-likes and a 5.5 per cent increase in overall sales. The analysts were generally right, although while M&S did, as predicted, do badly, both Next and Matalan’s shares plummeted as they revealed particularly disappointing Christmas trading.
Accuracy: Spot on
Fears of a post-September 11 spending downturn proved unfounded. 2001 really was a year of bumper consumer spending, despite an economic slowdown. Credit was cheap, unemployment low, house prices were high.
Confederation of British Industry retail spokesman Alastair Eperon said: “Stores are now hopeful that consumer spending in the run-up to Christmas will protect the retail sector from the severe slowdown hitting the rest of the economy.”
By the third week in December, analysts were unguarded in their optimism. Bubb said: “I think Christmas should be fine. People are confident about their household income and you would expect spending to continue.”
Richard Ratner at Seymour Pierce added: “Although department stores haven’t picked up as sharply as multiples, fashion retailers have come back sharply. I think Christmas will be okay.”
Analysts predicted correctly again. It proved to be a bumper Christmas. The BRC sales monitor showed an impressive 8.1 per cent uplift in December, with a like-for-like rise of 6 per cent – the best for five years. According to the CBI, 48 per cent of retailers reported their strongest growth since 1987.
Accuracy: Spot on
The 2002 festive build-up was buoyed by a strong economy and strong spending throughout the year. A CBI distributive trades survey showed that 42 per cent of retailers experienced a rise in November sales.
HSBC UK economist John Butler said: “This points to a good Christmas period and we’re likely to see even stronger sales than last year.”
However, pessimism was in the air in December after the CBI released its retailing survey, which showed pre-Christmas sales were static for the first time in 10 years.
Analysts said they expected sales growth of 3 to 4 per cent, pointing out that these figures only took into account trading until December 18. John Stevenson at ING Financial Markets said: “This is a definite slowdown, but only back to the average running rate of the past five to six years.”
The CBI forecasted catastrophe did not materialise. Like-for-like sales increased 1.7 per cent and total sales climbed 4.1 per cent. It proved to be a good Christmas for the good retailers. One analyst said: “The lesson is that the winners won by being the best at what they do – and the losers only have themselves to blame.”
By late autumn, analysts were predicting sales figures would be up on 2002, although Planet Retail analyst Bryan Roberts said the outlook was patchy; clothing would suffer, but a bumper year for electricals and supermarkets would boost overall sales numbers. Mintel analyst Richard Parks predicted sales growth of about 2 per cent.
Three weeks before Christmas and things were looking bleak. Shoppers were staying away – sparked possibly by talk of a burst in the economic bubble. Analysts were now anticipating like-for-like sales would not match the rises of previous years.
Overall, not a great year, as analysts had suspected in December. BRC figures said like-for-like sales fell 0.2 per cent and total sales rose 2.3 per cent. But this year really was a mixed bag.
Some retailers did brilliantly. John Lewis in particular posted a record Christmas week with a double-digit sales uplift.
Roberts was also spot on – Asda broke its Christmas trading record as 252 of its 265 stores reached sales of at least£1 million, but in clothing many posted dismal trading figures.
At M&S, clothing fell 3 per cent and at Matalan like-for-like sales slumped 5 per cent.
Accuracy: Spot on
Consumer confidence had been hit by five interest rate rises and the end of the housing boom but, in November, BRC director-general Kevin Hawkins said downbeat predictions could be premature. “October often sees shoppers pause for breath before Christmas trading really starts. It could still go either way,” he said.
By December, analysts reiterated warnings that retailers’ widespread strategy of deep
pre-Christmas discounting would lower revenues.
Bubb, now at Evolution, poured scorn on M&S in particular. He said some retailers’ discounting was “planned panic”, while some was “panic panic”, and M&S fell into the latter. By Christmas Eve, Richard Ratner dubbed this year “the most difficult and disappointing Christmas since 1979.” He added: “We believe sales will be down 2 to 4 per cent over the month.”
It wasn’t the worst Christmas since 1979, but it was the worst for a decade. Sales fell short of expectations and many of the big-name chains witnessed significant falls in like-for-like sales for December 2004, which overall were down 0.4 per cent on the equivalent period the year before. Total sales were up 2.5 per cent. For many this year was little short of disastrous.
Accuracy: Spot on
Despite terrorist threats and precarious consumer confidence thanks to rising council tax and utility bills, analysts were optimistic in the summer.
Richard Hyman said Verdict was predicting Christmas to be “rather better than last”, with year-on-year growth. Retail Knowledge Bank’s Robert Clark said: “Figures might be better than retailers were expecting in statistical terms.”
By November, analysts started to worry when the London Retail Sales Monitor showed a 2.3 per cent fall in comparables sales for October.
By December, the mood had darkened further. Aggressive early discounting remained a key concern for many. James Sproule, head of research at merchant bank Augusta, said: “I don’t see anyone saying, gosh, things are looking up.” Many warned it would be the worst for many years.
It was far better than expected. The British Retail Consortium’s retail sales monitor revealed total sales climbed 6.2 per cent and like-for-likes advanced 2.6 per cent – the best set of numbers since May 2004. Food was the star performer, but clothing sales were down on November. However, even retailers that posted impressive Christmas performances emphasised how uncertain business conditions remained.
Interest rate rises and higher utility bills began to bite towards the end of the year.
In the summer, the feeling was that 2006 would be disappointingly modest. “I don’t think it will be any worse than last year, but overall the conditions aren’t good,” said Tim Sleep at Ernst & Young. Capital Economics’ Vicky Redwood said: “All the signs are there that spending will be sluggish.”
By winter, Ratner had famously decided that Christmas 2006 would be the worst for 25 years. Not all were so pessimistic, but Woolworths’ pre-Christmas profit warning sparked panic.
Those forecasting disaster were way off the mark. Helped by aggressive discounting, BRC figures revealed that like-for-like sales rose 2.5 per cent and total sales climbed 4.4 per cent.
There were winners and losers but, for fashion retailers, a late rush and strong Sales helped level a disastrous December. Sales were mixed for electricals, but strengthened for department stores. Consumers spent a record£2.8 billion in supermarkets in Christmas week. Discounts at DIY and gardening outlets led to a modest improvement. Homewares, mail order, toiletries and cosmetics picked up, as did furniture sales. In short, it was far from the predicted catastrophe.
Accuracy: Way off
And for Christmas 2007….
The housing market looks likely to plummet, interest rates have gone up 0.75 percentage points, the UK is coping with enormous levels of consumer debt and the economy is in the midst of a credit crunch.
A Treasury forecast in October said that a steady weakening in the housing market will prompt a sharp slowdown in 2008, dragging growth to a three-year low. On the surface, things are not looking rosy, but analysts believe there is a glimmer of hope. Many say it won’t be good, but it won’t be terrible, either.
PricewaterhouseCoopers’ Mark Hudson says: “It’s not a crisis, but there is more uncertainty about. I think spending will be slightly down.” Verdict Research consulting director Neil Saunders says: “It will be more muted than last year, but it’s not going to be a bloodbath.”
Christmas generally goes from between 2 and 4 per cent growth. Credit Suisse analyst Tony Shiret believes it will be more at the plus 2 per cent level. “The general pattern will be one of consumers trading down,” he says.
Will the analysts be right? It will be little more than a month before you find out but, judging by their track record, the chances are they probably won’t be far wrong.