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Perfect storm hits the high street over Christmas

A perfect storm of mild and wet weather and unprecedented levels of discounting over Christmas delivered a mixed bag of festive trading for retailers across the high street.

Christmas shoppers

High street footfall fell 3.3% between Monday December 21 and Christmas Eve on Thursday December 24, compared to the same period last year, according to Springboard, dashing hopes of a last-minute rush in stores.

A spike in footfall on Boxing Day – up 11.7% year on year – was followed by 3% drop between Monday December 28 and Friday January 1.

December was the wettest month ever recorded in the UK, but it was also 4.1C warmer than the average temperature of 7.9C for the time of year, the Met Office reported.

Marks & Spencer blamed the unseasonal conditions and problems with availability for a 5% drop in general merchandise sales for the 13 weeks ending December 26. On a like-for-like basis GM sales were down 5.8%.

Despite running promotions of up to 30% some categories at the start of December, M&S said a decision to hold back from heavy discounting meant gross margin had increased.

Next also said the warmth, along with poor stock availability for its Next Directory catalogue and tough online competition, resulted in a “disappointing” 0.4% increase in sales over Christmas.

The retailer, which was one of the few to hold back on discounting until it launched its end-of-season Sale on Boxing Day, said gross margins were maintained. But it said it now expects full-year profits of £817m, towards the lower end of the £810m-£845m forecast issued in October.

“While warm weather may have been the main reason for a difficult fourth quarter, we would not want to allow difficult trading conditions to mask any mistakes and challenges faced by the business,” said chief executive Lord Wolfson.

John Lewis, which opted to keep its stores closed on Boxing Day but launched its clearance Sale online on Christmas Eve, revealed sales for the six weeks to January 2 rose by 6.9% to £951.3m, compared witih the same period the year before. Like-for-likes were up 5.1% and fashion sales rose 6.1%.

Sales in stores for the six-week period were sluggish, down 1.2% reflecting the lower footfall and despite its “Never knowingly undersold” price-matching promise. However, they were up 16.2% during the first week of clearance, ending January 2.

The department store group said the pattern of trade has “shifted significantly” and is now characterised by three distinct sales peaks – Black Friday, Christmas and clearance – with higher sales and a different channel mix for each peak.

This week, the BRC-Nielsen Shop Price Index revealed heavy discounting in the run-up to Christmas caused clothing and footwear prices to drop by 6.4% year on year in December.

Like Next, premium high street retailer Jigsaw refused to be drawn into the discounting frenzy, trading at full-price in store until Boxing Day. The tactic delivered record-breaking sales for the five weeks to January 2 2016, with like-for-likes up 13%.

The performance was boosted by a 115% surge in mobile transactions and a 13% increase in online sales during the Christmas week alone.

Chief executive Peter Ruis said this proved that discounting it ”only devalues fashion”.

  • M&S today announced that chief executive Marc Bolland is to retire in April and will be succeeded by Steve Rowe, who is currently executive director of general merchandise.

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