The traditionally lucrative Christmas trading period was a washout for many of Britain’s retailers in 2019 with more losers than winners emerging from a fraught sales period overshadowed by Black Friday discounts.
Poor performances from major high street chains including John Lewis, Marks & Spencer, and Morrisons, coupled with profit warnings from Joules, Superdry and Card Factory, capped a year described as the worst on record for British retail by the British Retail Consortium.
John Lewis – Loser
John Lewis’s 81,000 staff face a nervous wait to find out if they will receive a bonus this year after the firm warned that a collapse in profits could lead to no annual bonus payment for the first time in 67 years. For the second consecutive year the difficulties lay in its department stores where the boss, Paula Nickolds, carried the can for the poor performance. She is to leave the partnership after 25 years service. Sales at John Lewis’s established stores fell 2% while sister chain Waitrose managed growth of 0.4% in the seven weeks to 4 January.
Marks & Spencer – Loser
Shares in M&S took a hit after the retailer admitted to yet another wardrobe malfunction, along with too many Christmas food leftovers. Like-for-like clothing sales dropped 1.7% after the drive to make its menswear more fashionable backfired. It had doubled the number of slim and skinny fit trousers on offer at the expense of classic styles but the boss, Steve Rowe, confessed it “got the balance wrong”. Its food halls fared better, with sales up 1.4%, boosted by new ranges and lower prices, but it bought too much festive fare which it then had to discount, hitting profit margins.
Superdry – Loser
Superdry, the fashion brand known for hoodies and T-shirts emblazoned with Japanese script, was missed off Christmas lists with the company warning it could now make no profit at all this year. Co-founder Julian Dunkerton returned last year to lead the revival but there is no light at the end of the tunnel yet. The company has now issued four profit warnings in under 12 months, with sales falling 15.8% in the 10 weeks to 4 January.
Joules – Loser
It was also a horror (fashion) show at Joules after technical problems resulted in stock shortages on its website, hitting profits. Famous for its colourful wellies and waterproofs, sales declined 4.5% over the seven weeks to 5 January.
Sainsbury’s/Argos – Loser
Poor sales of toys and video games at its Argos chain snatched defeat from the jaws of victory for owner Sainsbury’s. The catalogue chain scrapped its traditional festive 3-for-2 promotion, denting toy sales, but it suffered from the absence of a must-have game or gadget. Sainsbury’s had a decent run in its grocery aisles, thanks to sharper prices and the appeal of its luxurious Taste the Difference range, but Argos was a drag on the group with sales at established stores finishing down 0.7% in the 15 weeks to 4 January.
Card Factory – Loser
There were no glad tidings from Card Factory either. The company blamed election torpor and quiet high streets for weaker than expected sales of Christmas cards and wrapping paper. The no-frills chain did not proffer a snapshot of trading but it was clearly bad with the retailer warning underlying profits would not be closer to £82m than the £89m pencilled in by analysts.
Morrisons – Loser
A decision to dial down Black Friday promotions backfired for Morrisons, which booked a 1.7% slide in sales in the 22 weeks to 5 January. The Bradford-based supermarket complained of an “unusually challenging period for sales” as rivals slashed prices to win over shoppers.
Greggs – Winner
The news was better from Newcastle baker Greggs, which is handing 25,000 employees a special £7m bonus – up to £300 each – in their pay packets after the bakery chain’s vegan sausage roll led to bumper sales and profits. The company was able to go back to City investors for the third time since November to say it was making more money than it had expected. Sales at established stores were up 8.7% in the three months to 28 December.
Next – Winner
Next also bucked the gloom as its slick website enabled it to cash in on strong demand for winter coats and knitwear stoked by a cold November. The retailer reported full-price sales growth of 5.2% for the last two months of 2019, with a 3.9% slide in store sales outweighed by a 15.3% jump in online sales. The performance enabled Next to nudge up its profit guidance for the year by £2m to £727m.
Q&AWhat are like-for-like sales?
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Like-for-like sales have become the benchmark in the City for judging the current performance of retailers. Typically represented as percentage growth rates, like-for-like sales measure sales at stores that have been open for at least a year, stripping out the impact of sales at newer stores. The idea is that they allow a more transparent comparison of a retailer’s sales performance over a certain period of time, when compared with the same period of time a year earlier.
However, there is no formal industry standard. This means that some companies include new extensions to stores in their like-for-like sales, while others include sales generated by a customer paying with a voucher. Critics of the measure say that like-for-like sales do not always give an accurate picture of a retailer’s health. They argue that of greater relevance is profitability and how well a company is adapting to challenges such as the living wage and online shopping revolution.
Aldi and Lidl – Winners
The German discounters Aldi and Lidl again trounced the mainstream supermarket chains with bumper sales growth over Christmas, fuelled by new store openings. Lidl even claimed to be stealing shoppers from Aldi as sales jumped 11% over the four weeks to 29 December 2019. Aldi’s sales were up 7.9% in the four weeks to Christmas Eve as shoppers filled their trolleys with booze and stollen.
Tesco – Winner
The UK’s biggest retailer emerged as one of the success stories from a subdued Christmas for the so-called Big Four supermarket chains. Its chief executive, Dave Lewis, said it had won business with low prices and discounts linked to its Clubcard loyalty scheme. Like-for-like sales at Tesco’s UK stores fell 0.2% in the 19 weeks to 4 January.
Dunelm – Winner
The success of this budget home furnishings chain may help explain John Lewis’s woes. The retailer clocked up like-for-like sales growth of 5% in the 13 weeks to 28 December thanks to improvements to its website and a bigger product range. Analysts said its £5 scatter cushions and £30 curtains were helping the retailer, which started as a market stall, pinch customers from upmarket rivals.
Majestic Wine/Naked Wines – Winners
Corks were also popping at Majestic Wine which delivered upbeat sales with English wine, crémant and spiced rum among the drinks in vogue. Sales at established stores rose 4.3% in the final three months of 2019, as it shifted nearly 25% more bottles of rum. French fizz also made a comeback with sales of champagne and crémant up 11% and 32%, respectively. Sales at online rival Naked Wines (the companies are no longer co-owned) jumped 11% over the same period with party-ready boxed wines, such as the Portuguese red Montaria Reserva, in demand.