Black Friday is the thief of retailers’ Christmas gladness
For Dr Seuss it was the Grinch that stole Christmas in order to put an end to the festive cheer of the residents of Whoville. Now modern-day retailers have found their own way to stop Christmas from coming: Black Friday, the discount bonanza that today rivals Advent for its role in the countdown to the big day.
The online US import certainly cast a big shadow over the shops in the run-up to Christmas 2019, and next week we will start to see how some of the high street’s biggest names, from Marks & Spencer to John Lewis and Tesco, traded their way through a choppy landscape of clothing discounts and food discounters.
Analysts say the absence of profit warnings at this stage is encouraging for investors, but expectations are low after two years of effectively recessionary behaviour by UK consumers. Any pockets of exuberance were snuffed out by Next boss Simon Wolfson, who last Friday wisely pointed out: “There isn’t a special Christmas consumer confidence versus the-rest-of-the-year confidence.”
The monthly high street sales barometer produced by consultancy BDO helps sketch out the landscape: it detected only a marginal increase in store sales in December despite what it calls “extreme discounting”.
At the end of the book the Grinch has an epiphany: “What if Christmas … doesn’t come from a store?” Well, British shoppers are in some sort of agreement here too, although not in a spiritual sense: BDO’s survey finds online sales up nearly 25%.
Its retail supremo, Sophie Michael, says: “Black Friday never quite ended. Discounting helps to shift volume and increase footfall but requires retailers to continue trading on thin margins and thin ice.”
Next had cheered investors with its better-than-expected performance, but it has a stellar web operation, and the appearance of Jack Frost in November helped too. Next is the exception – in no small part because of Wolfson – rather than the rule.
So where does that leave high street grande dame M&S? Did shoppers “go jumpers” for its woolly sweaters? The sale rail in my local branch suggests they didn’t, but after several years of chunky declines, analysts think clothing sales will be down by around 1%, which would be an improvement.
There is more optimism in its food halls, which were replete with clementine gin liqueur snowglobes and sticky toffee Christmas puddings. Here sales growth of a similar magnitude is anticipated.
The battle for the Christmas food shop looks, again, to have been won by those pesky German discounters, who played hardball with promotions and price cuts – 15p Brussels sprouts, anyone? Shore Capital analyst Clive Black suggests the festive season was a “bit of a grind” for the major supermarkets, with Tesco the likely winner and Morrison trailing behind.
And what of the travails of the John Lewis group? This time last year, the mutual warned that after a torrid run it was considering suspending its staff bonus – it went on to pay 3% of annual salary, which was the lowest in 66 years. The group’s recent weekly updates have been disappointing, barring a big Black Friday week of trading.
The late surge at Waitrose could have helped make up lost ground, but the veteran retail analyst Nick Bubb is still not convinced: “It’s John Lewis where the main pressure is: Thursday’s update will not make happy reading, even if it may not count as a profit warning.”
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