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With the underlying economic recovery gaining traction, coupled with an improvement in consumer confidence year on year, the UK retail and leisure market appears to be showing signs of growing momentum. JLL's annual Christmas Trading Update reveals that around 90% of UK retailers and leisure operators that have disclosed performance figures for the key Christmas trading period have registered positive like for like (LFL) annual growth, with 60% delivering LFL growth in excess of 5% year on year.
As predicted, the clear winners were retailers that provide customers with an integrated, seamless, multi-channel offer. Specifically, click-and-collect has cemented itself as a key channel in successful retailers’ strategies. While there were winners and losers within each retail sector, it is instructive to look at the few retailers posting negative LFLs. Marks & Spencer is the most prominent of these, due in part to issues with its online operations, which impacted customer fulfilment. Elsewhere, the major grocers generally remain in negative territory, despite a slowdown in the rate of sales decline. The outlook for the sector remains challenging.
When measuring the success of the Christmas trading period, it is now important to look at sales over November and December as a whole, as Black Friday appears to have permanently skewed traditional trading patterns. November’s strong retail sales growth balances out the more subdued figures from December (by the BRC measure), indicating a positive level of overall Christmas trading. It remains to be seen whether growth has been achieved at the expense of profitability for some retailers, due to the high levels of discounting witnessed on Black Friday.
One sector which is relatively immune to discounting is the foodservice sector. Christmas trade was generally strong for foodservice operators, with LFL increases of between 4% and 8%, due to growing consumer confidence and a firming of selling prices as consumers move from a ‘price based’ decision to an ‘experience based’ decision.
So, despite a couple of early New Year casualties, it appears that the changing trading patterns (and even the wintry weather) could not dampen retailer fortunes this time around. Here's to ongoing success in 2015!
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All figures to 1 decimal place.
Source: Retailer Press Offices and London
Stock Exchange (www.retailweek.com where not available)
Department / Variety StoresHouse of Fraser, John Lewis and Debenhams all reported strong LFL growth. All three have invested heavily in recent years in their multi-channel offers, and have reaped the rewards this Christmas. John Lewis used its multi-channel strength to help stimulate last minute purchases towards the end of the Christmas trading period, when many customers took advantage of click and collect, and House of Fraser is one of the few retailers to report strong store sales growth. By contrast, Marks & Spencer blamed disappointing General Merchandise sales in part on issues with its online operations, caused by problems at its distribution centre.
GroceryThe ongoing polarisation in the grocery sector remains evident, with Waitrose emerging as one of the clear Christmas winners, after posting record festive sales. Further evidence of strength in the premium end of the grocery market comes from Marks & Spencer’s food division, where sales were also marginally positive. At the other end of the price spectrum, Lidl also reported its most successful Christmas in the UK. The major grocers (only Tesco, Sainsbury’s and Morrisons have reported so far) remain in negative LFL territory, despite a slowdown in the rate of sales decline. They generally performed better than many analysts had feared, however, and it appears that the fight back is on, as Tesco and Morrisons have recently announced positive turnaround plans.
Clothing and FootwearIn the Clothing and Footwear sector, results were generally positive, with big winners amongst the established retailers including Ted Baker, Primark and SuperDry. A number of retailers reported that the performance of their e-commerce divisions was particularly important in driving overall sales. SuperDry, Jigsaw, Jaeger, Fat Face and White Stuff all reported positive LFLs, driven by strong online and digital growth, particularly in click and collect, which is a key component of their multi-channel strategy. The recent collapse of the Bank and USC fashion chains does, however, highlight the increasingly competitive nature of the sector.
BooksThere was some positive news this Christmas for the leading UK book retailers, in a sector which has been badly impacted by the growth of online. Foyles, The Works and Waterstones (physical books only) all announced encouraging LFL growth over the Christmas period.
FoodserviceOverall, Christmas trade was good for foodservice operators. We have seen like for like increases of between 4% and 8%, although there are some exceptions at both ends of the scale. Taking inflation into account at an average of 1.46% in 2014, the sector still traded positively, due to growing consumer confidence and a firming of selling prices as consumers move from a ‘price based’ decision to an ‘experience based’ decision. The Restaurant Group (Frankie & Benny’s, Chiquito, Garfunkel’s) saw strong LFL growth. Other strong performers include Living Ventures (Artisan, Manchester House, The Alchemist) and Wetherspoons.
OtherIn the Health & Beauty sector, Superdrug and Lloyds Pharmacy reported strong Christmas trade. In the Homewares sector, IKEA, Dunelm and Homebase all announced positive LFLs, boosted by the ongoing recovery in the housing market. Elsewhere, a firm stance against pre-Christmas discounts paid off for Mothercare, in a turnaround for the retailer, which has been unprofitable for the past three years.
Director, EMEA Retail Research
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