Christmas Trading 2023: finding positivity behind the headlines

Stores drive resilient retailer performance

The majority of UK retailers have now released their Christmas trading updates. Despite the ongoing cost-of-living squeeze and the usual dire pre-Christmas forecasts, sales have generally proved to be robust for individual operators. Three in four retailers have reported either LFL or total sales growth over the peak-trading period. With average total sales growth from those that reported of c.6%, it is clear that consumer spending and retailer trading performance continue to defy the prevailing negative headlines. 

Christmas Trading Update: 2023
Sector Operator Trading Period LFL Sales Growth (YoY) Total Sales Growth (YoY) Online Sales Growth (YoY)
Department / variety stores Marks & Spencer (Cloth. & Home) 13 weeks to 30 December 4.8% 4.8% 10.9%
B&M 13 weeks to 23 December 1.2% 3.7%
The Very Group 7 weeks to 22 December 3.4%
Poundland Quarter to 31 December 0.9% 3.1%
Argos 6 weeks to 6 January -4.2%
Fashion / footwear / accessories Sosandar 3 months to 31 December 23.0%
SeaSalt 5 weeks to 30 December 16.0% 11.0%
Hugo Boss 3 months to 31 December 10.2% 23.3%
JD Sports 22 weeks to 30 December 1.8% 6.0%
Next 9 weeks to 30 December 0.6%* 5.7% 9.1%
Primark 16 weeks to 6 January 3.8% 4.5%
Mulberry 13 weeks to 30 December -4.0%
Burberry 13 weeks to 30 December -5%**
N Brown 18 weeks to 6 January -9.3%
Grocery / food and drink Fortnum & Mason 5 weeks to 25 December 17.0% -11.0%
Lidl 4 weeks to 24 December 12.0%
Marks & Spencer (Food) 13 weeks to 30 December 9.9% 10.5%
Greggs Quarter to 30 December 9.4%
Booths 3 weeks to 6 January 8.7%
Sainsbury's (Grocery) 6 weeks to 6 January 8.6%
Majestic Wine 8 weeks to 25 December 8.1%
Aldi 4 weeks to 24 December 8.0%
Ocado 20-24 December 7.0%
Tesco 6 weeks to 6 January 6.8% 11.5%
Naked Wines Quarter to 31 December -10.0%
Homewares / household / DIY The Cotswold Company 9 weeks to 31 December 13.0%
Procook 12 weeks to 7 January -0.4% 3.0% -6.0%
Dunelm 13 weeks to 30 December 1.0% 2.0%
Topps Tiles 13 weeks to 30 December -7.1% -4.0%
Personal goods
Marks Electrical Quarter to 31 December 17.8%
Mamas & Papas 13 weeks to 31 December 17.0% 20.0%
Superdrug 4 weeks to 31 December 7.1% 9.2%
Bodycare 4 weeks to 31 December 8.2%
The Card Factory November and December 7.8% -12.8%
Boots Quarter to 30 November 9.8% 6.2% 19.2%^
Pandora Q4 2023 -2.0% 0.0%
The Hut Group 3 months to 31 December -1.0%
Curry's 10 weeks to 6 January -3.0%
The Works 11 weeks to 14 January -4.9%
Leisure / F&B Drake & Morgan 'Christmas' 31.7%
Mitchells & Butlers 7 weeks to Christmas 9.0%
Fridays December 4.0%
____________________________ ______________________

NB (1): Results are taken for the UK as standard, when not available, Group results are taken
NB (2): Not all reporting periods are directly comparable
*In-store sales
^as % of retail sales

December’s ONS data paints a more negative scenario, focussing on falling volumes across the board (-2.4% YoY). There are a couple of caveats, however; firstly there are question marks around the data, with Oxford Economics claiming that the ONS data is ‘much softer than the business surveys’ and ‘so weak that it raises questions about its credibility’. In addition, the Christmas period is now much broader than December, and strong volume growth in November (+1.4%) balances the picture somewhat. Also, the fact that sales values were up 2.3% in December and 3.9% in the quarter gets lost – this is clearly inflation-driven growth, but values (ie. money through the tills) is the metric that most retailers focus on. A detailed analysis of Christmas trading statements reveals that retailer sentiment is far more upbeat than official statistics and commentary would have you believe. Other trends to emerge from the festive updates include:

1. Grocery strength across the board… 

Grocery shopping dominated consumers’ Christmas spending - supermarkets had their busiest Christmas since 2019 with record grocery sales of £13.7bn over the four weeks to 24 December, and growth in sales volumes (Kantar data). Customers tended to trade up and /or down - Marks & Spencer led the market on volume growth (food sales +10.5%) and premium own-label brands hit a new high (Sainsbury’s Taste the Difference and Tesco Finest both +11.9%), while discounters Lidl and Aldi performed strongly (total sales +12% and +8% respectively).

2. …while other categories more mixed

Department / variety stores also reported buoyant trade, with Marks & Spencer again leading from the front (Clothing & Home +4.8%). Elsewhere the performance was more mixed, with Next reporting trade ‘ahead of expectations’ (total sales +5.7%) and Primark commenting on ‘strong Christmas trading’ (UK total sales +4.5%); JD Sports’ results, however, were ‘slightly behind expectations’ (LFL sales +1.8%). There were also signs that luxury (Burberry -5%, Mulberry -4%, Watches of Switzerland ‘volatile trading performance’) and big-ticket spend (Curry’s -3%, Topps Tiles -7%) is slowing as consumers prioritise other categories such as fashion, beauty and hospitality.

3. Footfall trends positively, for prime in particular…

Retail store footfall was 6.1% higher in December than November (MRI data), driven by an 11.1% rise in footfall at shopping centres. Both Battersea Power Station and Outlet Shopping at The O2 recorded strong growth in LFL sales, while Landsec also saw a ‘marked increase’ in visitors throughout the festive period. High streets also witnessed a surge in activity, with much of the rise driven by prime retail destinations (London’s West End +7.6%). Shoppers were clearly out in force over Christmas, drawn in particular to those destinations that provided retail, leisure and hospitality activities, in addition to festive events and attractions.

 4. …driving strong in-store sales growth

The strong footfall data chimes with the ongoing revival of store retailing over the festive period. Several retailers reported strong in-store growth (ProCook +9%, Fortnum & Mason +12%), as the post-pandemic return to the store continued to gather momentum. Majestic reported the opening of six new stores in 2023 helped it to serve 63,000 new customers, while Mamas & Papas commented on the direct benefit of its store investment programme (LFLs up 7.0%). The shop-revival represents a remarkable reversal from 2020 and 2021, and is being driven partly by a substantial reduction in fixed costs of operating stores, due to steep rental falls, and the recalibration of business rates.

5. Online slows, but omnichannel remains route to success

At the same time, online retailers have been hit with higher prices for everything from fulfilment to marketing. This (combined with the consumer return to the store) has contributed to slowing of online sales growth, which was again in evidence over the Christmas period. While online sales growth accelerated for several leading retailers (Marks & Spencer +10.9%, Tesco +11.5%), others reported a slowdown (Fortnum & Mason -11%, The Card Factory -12.8%). In addition, the recent struggles of the online pureplay model continued for some (N Brown -9.3%, Naked Wines -10%). Few believe that online retail has passed its peak (Forrester Research expects online retail sales growth to rebound to pre-pandemic levels in 2024). However, with the resurgence of store footfall and spend, the spoils will be won by those operators that are present wherever shoppers are (ie. with a coherent omni-channel strategy).

Outlook: challenges ahead, but store renaissance to continue

The retail outlook remains challenging and nuanced - once the festive trading high wears off, the financial constraints felt in the latter part of 2023 for many consumers are likely to continue into the early part of 2024. There will be a degree of consumer caution in the short-term, which will likely hit discretionary spend hardest, and may also impact footfall in certain UK retail destinations. 

However, with inflation expected to drop sharply over the coming months, boosting real household incomes, the retail sector's fortunes will improve in 2024. In particular, the store renaissance looks set to continue - the rising cost of debt and the erosion of cost advantages for online retailers are shifting consumer behaviour back towards in-store shopping, post the pandemic. This, along with retailers' demand for bigger outlets in more desirable locations, will drive the success of prime retail destinations in particular in 2024 and beyond.

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