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Thursday, 9 January 2014

Christmas trade - the winners and losers

This week, many investors are preparing for the good and bad news as retailers are releasing mixed results of profits and sale figures for the Christmas period. Some are already reporting a substantial increase while others are failing to live up to expectations.

John Lewis, Asda, Next and House of Fraser are among the large retailers doing well while Marks & Spencer, Debenhams and Mothercare have warned of a significant drop in sales.

John Lewis has reported an increase of 22.6% in online sales, giving the overall total a welcoming boost; sales over the last few weeks of December were up 7.2% from the end of last year. John Lewis’ Managing Director, revealed sales reached £35.6 million on the day their sales began (27th December). They avoided joining other retailers in the sales before Christmas, which evidently was in their favour!

The successful sale period for many medium and large sized retailers was largely due to the rise of online sales, with BDO’s high street sales tracker reporting a 31% increase in online sales towards the end of last year. However, medium sized retailers overall were down 2.2% with fashion shops the most affected (a drop in sales of 4.6%).

Not everyone can share the good news though - Mothercare, Debenhams, Tesco and Marks and Spencer have all appeared to have done worse than expected in the lead up to Christmas.

Marks and Spencer’s plan to boost sales before Christmas, by heavily discounting items in store, raised alarm bells for investors and industry analysts. They have since been expecting to hear an overall drop in profits in December. Figures out today show this indeed was the case, with a fall of 2.1% in clothing and homeware sales compared to the last few months of 2012. The food department, however, has been doing very well; its biggest day of sales on the 23rd December reached £64 million.

Debenhams released a profit warning earlier this week admitting they would be down £15 million mostly due to the surprisingly poor week of sales before Christmas. While, Tesco released figures today showing a 2.4% fall in sales in the lead up to Christmas, blaming a ‘weaker grocery market’.

Mother care’s three year turnaround plan is still very much in development as their profit warning yesterday (8th January) revealed that UK Christmas sales had dropped by 4% and worldwide by 6.1%. Share prices also sharply fell by 30%. It’s too early to tell whether Mothercare will face administration in the future but we all know there will likely be more challenges to come.

Overall the fall in sales across stores in the UK show we’re still in tough times, with many venturing to cheaper online stores, dismissing pricier high street retailers. Will it be more of the same next Christmas? What will retailers’ predictions be for 2014?

If you’re struggling with rent increases and poor sales, there may be a way to keep your retail business alive, either with a CVA or pre-pack administration. For more tips and advice, visit our retailer rescue pages: http://www.companyrescue.co.uk/company-rescue/guides/retailer

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