The Retail Note - 17 January 2017
The Retail Note
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- Most of the smaller, later reporting retailers are re-iterating the positive newsflow of their larger counterparts. Total sales at upmarket fashion brand Reiss rose 19.7% in the six weeks to 7 January. UK sales rose 11.6%, primarily generated by like-for-like growth and ecommerce expansion.
- Hobbs sales rose 3.9% on a like-for-like basis for the 13 weeks to 31 December. Like-for-like growth accelerated to 16.1% during the three weeks prior to Christmas Day. Total sales rose 14.3% in the 13-week period, with sales of knitwear, outerwear and novelty loungewear reported to be among the strongest.
- Hotel Chocolat’s sales surged 16.2% over the 13 weeks to 25 December. Growth was driven by increases in footfall and items per basket. The online business showed “similar momentum”, with a new website launched this month. Hotel Chocolat opened 10 new stores during the six months ended December, and now has 90 stores in the UK.
Stephen Springham, Head of Retail Research:
A raft of retailer trading statements last week (imaginatively dubbed ‘Super Thursday’ by the media) on Christmas trading (aka ‘The Golden Quarter’, sigh) provided a picture of relative good health. Earlier figures from the BRC (+1.7% overall and +1.0% like-for-like) had signalled that trade generally had held up well and positive figures from most of the retailers themselves supported this.
To re-iterate the caveats outlined in last week’s Retail Note, retailer Christmas trading statements are not watertight and the reporting period can significantly skew headline numbers one way or another. In simple terms, just because one retailer puts out bigger numbers than another does not necessarily mean that their performance was stronger.
In grocery, both Morrison’s (+2.9% increase in like-for-likes for the nine weeks to 1 January) and Tesco (+0.7% for the six weeks to 7 January) provided evidence that their respective recovery programmes remain firmly on track. Sainsbury’s performance (+0.1% for the 15 weeks to 7 January) may have looked lacklustre by comparison, but nevertheless contained a number of positive messages and the direction of travel is definitely the right one. Narrative of a ‘Big 4 fightback versus the discounters’, however, was tempered by Aldi reporting overall sales growth of 15% for the month of December and Lidl posting a 10% increase for the festive period. Neither discounter provided a like-for-like figure and Lidl gave no indication of the timeframe of said festive period.
If there was one positive message from the Christmas period it was that the grocery market generally has returned to growth. There will obviously be inflationary pinch points as this year unfolds, but these are obviously easier to bear in a growing, rather than contracting market.
After the relatively disappointing figures from Next, most of the other clothing retailers surprised on the upside. Others may have provided more stellar growth figures, but M&S and Debenhams arguably scored the more points by confounding their doubters. M&S reported a 2.3% like-for-like increase in clothing and home sales for Q3 (to 31 December). Although this figure was flattered by calendar distortions (+1.5%), it nevertheless gave credence to the recovery strategy being implemented by Steve Rowe. Debenhams reported group like-for-like growth of 5% for the seven weeks to 7 January (+1.7% on a constant currency basis).
Again, the bigger picture was more revealing than individual retailers’ trading performance. There is a determined effort on the part of many retailers to pull back from discounting and reduce the number of promotions (eg M&S did not take part in Black Friday, others engaged far less than previous years). In essence, retailers are trying to re-establish trust in their pricing, which can only be a good thing for the retail industry.
Due for release this Friday, the official ONS figures for December (our pre-Christmas prediction of volume growth of 4% to 5% and value growth of 2.5% to 3.5%) are likely to rubber stamp what was a fairly strong Christmas for UK retail. But the two salient trends we highlight – a sustainable return to growth in food sales and a scaling back in promotions/discounts in non-food – are more positive for longer term health than any Christmas sales figures.