<< back
ReachX logo

Clear warning signs in UK Christmas retail sales data

Publication Date: 11 Jan 2019 - By Gaurav Sharma (Associate Editor ReachX) By Gaurav S.

Equity Fundamental Macro Multi Asset UK Consumer


Warning lights are flashing for the UK retailer sector as shops registered their worst Christmas performance in a decade. 

According to data published by the industry lobby group British Retail Consortium (BRC), total retail sales showed 0% year-on-year growth during the month; the worst December performance on record since 2008.

In a statement, the BRC said steep discounts on offer appeared not to have been enough to encourage shoppers. Lending weight to BRC data, struggling retailer Debenhams (LON:DEB) reported a 5.7% fall in like-for-like sales, which strip out the impact of new stores, in the 18 weeks to 5 January.

Additionally, Marks & Spencer (LON:MKS) saw its sales saw its like-for-like sales decline by 2.2% in the 13 weeks to 29 December. Food sales fell 2.1% and its clothing and home sales division slid 2.4%.

Morthercare (LON:MTC) and Halfords (LON:HFD) also raised red flags. However, John Lewis (+1.4%) and supermarket leader Tesco (+2.2%) (LON:TSCO) appeared to buck the gloom posting an uptick in taking over the festive period. BRC chief executive Helen Dickinson said: "Squeezed consumers chose not to splash out this Christmas, with retail sales growth stalling for the first time in 28 months.

"The worst December sales performance in 10 years means a challenging start to 2019 for retailers, with business rates set to rise once again this year, and the threat of a no-deal Brexit looming ever larger."

She added: "Retailers are facing up to this challenge, but are having to wrestle with mounting costs from a succession of government policies - from the apprenticeship levy, to higher wage costs, to rising business rates."

Dr Gordon Fletcher, retail expert for the University of Salford Business School, said the mix of winners and losers raises some serious questions. “It points to a challenge in the sustainability of department stores whose retailing mix is not primarily focused on food and perishable items. 

“However, there is a second part to this story and potentially there are no winners. All retailers have flagged the issue of deep discounting over the Christmas period - a practice that is not sustainable and has direct impact on the overall profitability of retail business models. Combined with zero year-on-year sales growth across the sector and the warning signs remain that the issues for retail are not seasonal or so easily dismissed as consumer Brexit jitters.”

Paul Martin, UK head of retail at KPMG, said even discounting had not helped. “Growth in food did provide a glimmer of hope, being among the few categories to notice an uptick. However, the continued contrast in performance between the High Street and online remained evident in December - albeit 2018 did also see a continued slowdown in online retail sales." 


Most read