UK: Sluggish start, late surge, solid rather than bonanza, Planet Retail
Planet Retail - Nov 4th 2013, 17:50
On Planet Retail’s predictions for the UK retail market over Christmas 2013, Stephen Springham, Senior Retail Analyst at Planet Retail, commented:
"We are confident that 2013 will prove a better Christmas than for many a year for UK retailers, but any talk of a boom is as premature as it is misguided. Planet Retail predicts that total retail sales will grow between 2.5% and 3% in December, with like-for-likes (excluding new space) likely to be between 1.0% and 1.5%. A brighter economic backdrop, rising consumer confidence and an improving housing market will only be partly kept in check by low wage inflation and spiralling energy costs. The trend in retail sales has been quietly positive throughout 2013 and should carry through to the festive period.
However, the retailers themselves will by no means have an easy ride - they will have to work harder than ever in the chase for very limited overall volume growth. One of the most challenging factors they face is that the build-up in trade is likely to be slow in October and November, before culminating in a large surge in the days prior to Christmas. A ‘late’ Christmas will put pressure on retailers to stimulate sales and we expect unprecedented levels of promotional activity, including a plethora of one-off ‘sales extravaganza days’. But we would stress that these promotions will be pre-planned and pre-budgeted (and insulated from gross margins), rather than panic discounts borne of desperation.
To say that 2013 will be the biggest multi-channel Christmas ever is a statement of the blindingly obvious. Every Christmas forever more will be. But we are likely to see some interesting trends around e-commerce and we believe that Christmas 2013 could see a notional but significant step change - click & collect could well surpass home delivery (the traditional ‘pure-play’ e-commerce model) as a fulfillment means. M-commerce is also likely to come over age. Those with the largest and most conveniently-located store networks - often the major grocers and high street retailers such as Argos - are best equipped to capitalise.
Retailing is for life, not just for Christmas. Quite simply, those retailers that will be ‘winners’ over Christmas are those that have been trading well over an extended period and carry this momentum forward. Put another way, retailers don’t simply have a ‘good or bad’ Christmas in isolation - retailing is a year-round business that happens to peak over the festive period. For winners, look for the likes of John Lewis, House of Fraser, Next, Sports Direct and Home Retail Group in non-food. All of these are already trading well. Among the grocers, Waitrose, Sainsbury’s and the hard discounters currently carry the most momentum.
Wintry weather (and snow especially) is the key downside risk to this optimism - the closer this comes to Christmas Day itself the more damaging it will be. The worst case scenario would be a slow start in October and November (as we predict) and then the late surge in December derailed by heavy snowfall across the country. Romantics and Bing Crosby fans may be yearning for a White Christmas, but few UK retailers share their longings."
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