The Christmas winners and losers on the high street will be revealed this week as at least 20 retailers, including Tesco, Marks & Spencer, Sainsbury’s, Morrisons and Debenhams, report festive trading figures.
Last week’s results from Next and John Lewis showed a poor but not disastrous festive season for non-food retailers as shoppers saved a burst of spending until a few days before 25 December, or for the post-Christmas sales. Further reassurance was provided by a survey of mid-size retailers from accountant BDO, which reported a 7.9% rise in sales at established stores and websites in the last week of December.
After a disastrous year, speculation over who had the worst Christmas now focuses on Debenhams, which is expected to issue a profit warning any day. The retailer’s travails have pushed its market value so low that at one point before Christmas it was worth less than Angling Direct – a fishing tackle retailer with 24 stores. Debenhams, which was discounting by up to 70% last Friday, was hoping a weekend sales burst would help it meet already low market expectations. It is keen to avoid a profit warning and defend itself against Sports Direct boss Mike Ashley, whose retail group owns almost 30% of Debenhams and has considered taking it over to help prop up House of Fraser, which it bought out of administration in August.
A colder start to the year will have helped clear winter stock, but Debenhams could still issue a warning before the scheduled update at its annual meeting on Thursday.
Low consumer confidence fuelled by uncertainty around Brexit is likely to make 2019 another tough year for retail, and investors will be closely watching chains such as Mothercare, Footasylum and Quiz. The first trading statement from Ted Baker since chief executive Ray Kelvin took a leave of absence, after staff allegations of harassment were reported by the Observer, is also keenly awaited.
“Consumer confidence has deteriorated and, in the near-term, the political environment looks to remain uncertain (which could continue to weigh on the housing market: a key confidence driver). Combined with ongoing structural pressures, we expect this to weigh on top line performance,” said Georgina Johanan, a retail analyst at JP Morgan in a note.
M&S, which matched Next in largely holding off on heavy discounts until late December, may have benefited from the late surge, but a bigger influence on M&S could be whether it improved its online service.
Next’s update laid out a stark divide between its stores and its web operation, with high street sales down 9.2% and online sales up 15.2%. M&S lost out in 2018 after online warehouse issues forced it to stop offering next-day delivery, but the signs are that this year things have gone more smoothly. Still, M&S’s broker Shore Capital is expecting a fall of up to 3% in sales of clothing and homewares at established M&S stores and a similar picture for food.
Among food retailers, Sainsbury’s will be under scrutiny as it awaits findings from the competition watchdog on its proposed tie-up with Asda. Reports by the three major listed grocers will reveal how their efforts to compete with discounters including Aldi, Lidl and B&M have fared.