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2018 UK Christmas Trading Round Up

Updated: Feb 18, 2019

UK retailers faced their worst Christmas trading since 2008, according to an article released by the Financial Times late last week. Sales were reported to be flat in December versus last year, compared to a 1.4% increase against the year before, in spite of heavy discounting tactics used by many high street players. Christmas trading updates from many retailers composing the British Retail Consortium were grim, with retailers including Tesco, Debenhams and M&S posting weak sales and profit figures. Headlines from the FT summarise this atmosphere neatly, as John Lewis’ staff bonuses are facing risks, M&S festive sales are down 2.2%, and Debenhams falls back on discounting. Unsurprisingly, several of these retailers saw their share prices drop in response to poor holiday period trading.

Investor sentiment towards retail remains cautious and is a sector many are avoiding. The FTSE All Share general retail index fell by 20% in Q4 of 2018, and currently trades at 11.5 times forecast earnings, a level last seen in 2012. General retail shares also remain the most shorted in the market, with past favourite ASOS joining the likes of M&S and Debenhams. Debenhams’ bond prices have also dropped sharply amidst concern about the department store’s financial condition.

A key driver for this pattern includes modest spending by British consumers, particularly in light of Brexit, as many anticipate prices for essentials to increase in coming months. Consumer confidence according to the GFK index reached an all time low in December as Brexit uncertainty intensifies. This is despite real incomes increasing for the first time since the referendum result in June 2016. The shift from offline to online shopping is also another factor to consider. As traditional retailers attempt to integrate e-commerce into their offline operations, they risk cannibalising offline sales. Next is an example of a successful ‘clicks-and-bricks’ retailer the past festive season, although the majority of traditional retailers have continued to suffer from this cannibalisation effect, which is aggravated by continually rising fixed cost of operating physical stores.

However, not all UK brands have suffered. Winners this festive season include Selfridges, Ted Baker, Joules and Fat Face, due to their strong branding and ability to cultivate memorable destinations.

Written by Charmaine Leong

Charmaine is a fashion-tech and luxury enthusiast currently reading the Masters in Management 2019 and participating in the Walpole Programme. In addition to gaining a BSc (Hons) in International Fashion Management at the London College of Fashion prior to LBS, she also has experience in digital consulting, merchandising and fashion-tech incubator projects with Microsoft.

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