Retail giants such as Tesco, Sainsbury’s M&S and Next have unveiled their trading results for the crucial Christmas period and despite inflation soaring and concerns about waning consumer demand, shoppers splashed out.
M&S CEO Stuart Machin says: “Customers wanted to celebrate the best they could over the Christmas period.”
There were positive performance across the sector with a slew of profit upgrades as total sales across retail jumped 6.9% in December year on year, according to the BRC.
The winners and losers
There were a raft of profit upgrades from the likes of Next, Sainsbury’s, B&M, JD Sports and Card Factory following a better-than-expected Christmas for retail.
Next posted better-than-expected sales, up 4.8% over the golden quarter, and now expects a full-year pre-tax profit of £860 million, up from a previous forecast of £840 million.
Retail giant M&S also celebrated a 9.9% sales jump, with food like-for-likes up 6.3% and clothes up 8.6%. The retailer notched up record market share in food ever, and its highest share in clothing and home in seven years, with positive numbers across all categories.
In grocery, the discounters were the big winners with Aldi sales soaring 26% and Lidl’s surging 24.5%. However, the traditional retailers fared well with Tesco and Sainsbury’s posting strong sales growth.
The big losers this year came from the world of online with big pureplays including Asos, N Brown, Very Group and Virgin Wines all posted falling sales.
Asos, which posted an 8% drop in UK sales in the four months to 31 December, expects to make a loss for the year and new CEO José Antonio Ramos Calamonte is taking strong action to turn the retailer around.
He plans to cut office space and close down warehouse storage as he aims to save £300m through cost mitigation measures.
Meanwhile, Virgin Wines warned on profits after its sales plunged 16.8% over the golden quarter.
The online wine specialist was hit by both internal and external factors.
Issues with its new warehouse management system created a backlog of orders whilst postal strikes and bad weather in the lead up to Christmas forced it to bring forward delivery cut-off times by a week, which it said cost it £1.5m of sales.
The big Christmas trends
Shoppers wanted to celebrate
Despite the backdrop of the cost-of-living crisis, shoppers wanted to celebrate this Christmas.
Tesco boss Ken Murphy says that the fact that for many it was the first Christmas without Covid restrictions for three years meant that shoppers wanted to make sure it was a good one.
“We were pretty confident it would be decent Christmas as it’s the first pandemic-free Christmas for some people for a few years and a chance to escape the daily challenges of the cost of living,” he says.
Sainsbury’s noted that shoppers “went all-out” when it came to their Christmas dinner and it had a record year on champagne and fizz.
Majestic, which posted the second best Christmas performance in its 42-year history, also saw sparkling wine and champagne sales soar as office Christmas parties and family get-togethers returned over the festive period.
The return of the Christmas party also helped drive fashion sales. M&S’s partywear more than doubled year on year and formalwear jumped 40%.
Despite the cost-of-living crisis, retailers are expecting this desire to celebrate to continue into the new year.
Machin says that M&S is backing big events like Valentine’s Day and Mother’s Day to help drive sales momentum.
He says shoppers have told them there is “still lots they’re planning for” over the course of the year, with the focus being on big events.
From Valentine’s Day to Mother’s Day and Easter, Machin says “there is opportunity across home but also food to maximise those events” to maintain its sales trajectory.
Price rises drive sales growth
Christmas may have looked merry for retail with many businesses notching up strong sales growth, much – if not all – of this growth is due to inflationary price rises pushing up the value of goods being sold.
Both Tesco and Sainsbury’s revealed that sales volumes had dropped year on year.
BRC chief executive Helen Dickinson said: “Despite the stronger sales, growth remained below inflation, making December the ninth consecutive month of falling volumes.”
Shoppers returned to stores as online sales fell
Shoppers returned to stores in their droves over Christmas in a continuation of a trend seen across the year.
However, the delivery disruption the Royal Mail strike caused across December exacerbated this trend.
At Next, store sales jumped 12.5% compared to just 0.2% growth online while Sainsbury’s online sales fell more than 10% over Christmas, despite a 7.1% sales rise.
At Argos, “walk-in” visits in the week before Christmas jumped 50% as Sainsbury’s CEO Simon Roberts said customers wanted certainty they would get their Christmas presents amid delivery delays.
The importance of a strong omnichannel offer was critical with click-and-collect sales soaring.
M&S said click-and-collect jumped 20% year on year while at Argos the collection method jumped from 40% to 50% of sales over the period.
Online players were hit over Christmas, with ecommerce sales down 12% in December, according to IMRG, with no major category achieving year on year growth.
In light of the Royal Mail strikes and knock-on effect it had on the delivery network, Asos was one of many retailers that was forced to move delivery cut-off dates for Christmas and New Year earlier, which hit sales.
Toys, beauty and tech top performers
The traditional gifting categories of beauty, toys and electricals had a strong Christmas.
Boots retail sales jumped 15% in December while The Fragrance Shop sales rocketed 11.2%.
The Perfume Shop sales also reached a record high over the golden quarter as 1.8 million product items were sold between 28 November and 24 December.
Very said its toy sales were up an impressive 26% year on year, while beauty and fragrance jumped 12.7%.
At Argos, sales over Christmas jumped 7.1% with technology products particularly strong. Specialist Marks Electricals also saw sales soar 33.4%.
Electricals demand was boosted by promotions around the World Cup, a big period for TV sales, and strong demand for energy-saving items such as air-fryers and heated laundry airers.
Value is top of mind
Shoppers may have spent but they were still looking for value this Christmas.
Sainsbury’s boss Roberts says: “Customers looking for strong value and are looking harder than ever before”.
In this environment, discounters and value players such as Aldi, Lidl, B&M and Poundland all thrived as some shoppers shifted toward shopping with specialists.
However, a strong value offer was critical across the high street.
M&S boss Machin says its work on upping its value credentials had helped woo shoppers over Christmas.
“There’s no doubt that our entry price products did resonate with customers who were seeking out value,” he says.
In food, M&S’ Remarksable Value range was up 27% on last year and featured in 20% of customer baskets, which Machin said showed that its customers wanted “competitive prices whilst not compromising on M&S quality”.
There was also a big drive towards own-brand products, particuarly in grocery with both Tesco and Sainsbury’s noting an uplift of their own-label products.
Shoppers still looking for a treats
Consumers may be seeking out value but they are also looking to make their budgets stretch to treats for themselves and loved ones.
Both Tesco and Sainsbury’s flagged that as well as their value offer, premium lines also experienced strong growth over Christmas.
Sainsbury’s premium Taste the Difference sales jumped 10% year on year, and 27% against pre-pandemic levels.
“Shoppers were trading into private label so can use some budget to treat themselves,” explains Roberts.
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