Christmas retail results have so far been mixed for the UK’s retailers.
Fashion retailer Next beat expectations while department store Debenhams announced an unexpected profit warning. Supermarket Tesco and the online retail market broadly are expected to be upbeat, though M&S investors are nervous.
Timeline for Comment wire
- September 18, 2019
Next’s better-than-expected Christmas trading update prompted growing optimism that the UK high street might have fared well over the festive period.
However Debenhams’ surprise profit warning just two days later quashed much of the optimistic feeling.
This week a slew of other UK retailers will post their Christmas trading results. Supermarkets Tesco, Sainsbury’s, and Morrisons alongside Marks and Spencer, John Lewis, and House of Fraser.
It is expected that a picture of a very divided high street will emerge.
Tesco’s turnaround continues
Tesco has undergone a turnaround in its business in recent years following the appointment of David Lewis as chief executive in 2014.
After German discounters Aldi and Lidl began stealing market share Tesco looked under threat. The price war, coupled with an accounting scandal, led to the company losing market share amidst a series of profit warnings.
The UK’s biggest supermarket looks a lot different to how it did three years ago however. In October Tesco posted like-for-like sales, which exclude new store openings, up by 2.1 percent in the second quarter.
It also paid a dividend for the first time in three years, which it said reflected “board confidence”. And since then Tesco has had the green light for its £3.7bn takeover of wholesale giant Booker.
Lewis is likely feeling far more confident than he was this time last year.
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Marks and Spencer expected to have struggled
M&S has faced problems recently, particularly with regards to its clothing sales which tumbled throughout 2017.
It is unlikely that this slide will have been arrested throughout the festive period.
What’s more, while M&S food sales have traditionally seen good growth, these too have been under increasing pressure from rising competition in the luxury food offerings from the big four supermarkets as well as the discounters Aldi and Lidl.
M&S is expected to reveal a lacklustre performance for the Christmas period.
Online retail will outperform high street
A good performance over the festive period is expected to be revealed by online retailers such as Amazon and also those retailers that offer efficient delivery services such as Argos.
Online consistently outperforms bricks-and-mortar retail, remaining the saving grace for numerous high street retailers.
For example, despite Next’s promising Christmas, trading results the company actually saw a 6.1 percent decline in its high street store sales, while in comparison, online sales rose 13.6 percent. This is a trend that will be prevalent amongst most of the UK’s big retailers.
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