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Comment: What the high street Christmas results tell us

Christmas oxford street

Today brought another slew of Christmas trading updates from fashion and footwear retailers, adding to those released yesterday and earlier in the week.

The results were largely positive, but there were some clear winners and losers. Notably, retailers that have  invested in creating strong, integrated multichannel operations strode ahead of the pack. Ted Baker and Superdry were among those reporting double-digit surges in online sales, the latter of which attributed its 31.6% rise in ecommerce sales to its “disruptive approach”. Boohoo Group enjoyed a staggering 100% rise in sales over the Christmas trading period.

Meanwhile, John Lewis’s expectations that margins will be hit by its price-matching strategy signals that for many retailers, discounting could erode the bottom line despite robust year-on-year sales performances.

Capitalising on ecommerce

Boohoo Group has enjoyed a long period of growth, but still the rate at which its Christmas sales soared came as a surprise. Total group revenue doubled in the four months to 31 December.

Most retailers reporting results this week said the increase in ecommerce sales far outstripped that of bricks-and-mortar stores. As a pureplay, Boohoo is undoubtedly geared up to capitalise on the continuing trend towards shopping online at Christmas.

Joint CEOs Mahmud Kamani and Carol Kane said their focus “remains on the customer proposition: offering the best range of the latest fashion at affordable prices, coupled with great customer service”.

Hugh Fletcher, global head of consultancy and innovation at ecommerce consultancy Salmon, notes that years of investment and organisational change are now paying off for Boohoo, adding: “With these stats there’s no hiding for the digital laggards.”

Discounting versus full price

Many retailers noted how fiercely competitive the high street was in the run-up to Christmas, as the most slashed their prices to lure shoppers. Lifestyle retailers Fat Face and Jigsaw were among those to hold firm to a “no discounting” stance – and both posted a rise in sales over the festive period.

Conversely, Ted Baker, Quiz, Boohoo and John Lewis were among those to throw themselves head first into discounting. Many enjoyed remarkably strong sales growth, particularly over Black Friday. However, as retailers generally do not disclose profits in their Christmas trading updates, the impact on their margins is not yet clear.

Creating a strong brand identity

Christmas is typically when department stores come into their own, thanks to the breadth of their offers. However, both Debenhams and House of Fraser have struggled this season, pointing to tough market conditions and a number of internal challenges.

John Lewis, however, seems to be bucking the trend. Gross sales at the department store chain grew by 3.6% year on year for the six weeks to 30 December, and fashion sales were up 4.9%. One reason for this may be the comparative strength of the John Lewis brand. The business has launched new in-house fashion and homeware labels in recent years, helping it to stand out from its competitors.

John Lewis is trusted by its customers, and has successfully staked a claim over the upper end of the high street. This paid off with strong sales over Christmas. Not to mention the frenzy it has created around its Christmas advertising campaign. Love it or loathe it, Moz the Monster has currently been viewed 9.6 million times on Youtube – whereas Debenhams’ ad has only been viewed 1.4 million times.

What this means for the year ahead

After a mixed Christmas, 2018 looks set to be a year of change for many retailers. House of Fraser, John Lewis and M&S are among those looking to transform their operations.

House of Fraser chief executive Alex Williamson said the department store company would focus on “making sure we’re agile and adaptable enough to whatever comes our way”, while Marks & Spencer boss Steve Rowe signalled more changes ahead as it “continues with the accelerated transformation programme we outlined in November”.

Meanwhile, Sir Charlie Mayfield, chairman of the John Lewis Partnership, warned that the coming year would be tough: “We expect trading to be volatile due to the economic environment and anticipate that competitive intensity will continue, driven by the structural changes taking place in the retail industry.”

The message is clear: while many retailers enjoyed a welcome boost to sales over the all-important Christmas trading period, this is going to be a challenging year, and nothing can be taken for granted.

 

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