Christmas trading positive for high street

Official High Street figures show a rise in retail sales for the month of October, and analysts are positive the run-up to Christmas this year will be one of healthy trading. The strong result showed sales increased by 0.9%, 0.3% higher than expected. Clothes stores had a strong month, up nearly 2% and even household goods stores, who have been struggling for months, saw strong sales gains. The internet and mail order jumped 2.5%.

Retailers have been worried that the August and November interest rate rises could be enough to persuade people to have a frugal festive season this year. As with last year, shops have been careful not to over-order on goods, reducing the chances that they will have to dump stock after Christmas in costly discount deals.

19 November 2006

Christmas sales versus January blues

The boost of the Christmas rush has not had the same effect on the January sales, according to figures from the Confederation of British Industry who this week revealed sales fell back sharply in January. The survey showed that while 28% of retailers said sales volumes were up in the first two weeks of January, 38% said they were down. That left the sales balance at -11 in January, from 0 in December, a steeper decline than expected.

Asda director John Longworth, who heads the Distributive Trades Survey panel, reported told the Guardian: "Looking ahead, expectations for growth are the strongest since May but sales remain heavily dependent on price discounts and promotions." The consumer spending downturn is having a knock-on effect on the retail property market. A study from the Royal Institution of Chartered Surveyors showed new enquiries from retailers to lease space in the final quarter of 2005 fell at the fastest rate in four years, while the supply of retail space available rose at its fastest rate in three years.

Christmas sales figures not as gloomy as expected

Strong high street sales over the vital Christmas period are expected from a string of retailers this week as trading updates confound earlier gloomy forecasts. Industry experts warn that in many cases the better than expected figures have been at the expense of profit margins.

M&S will stand out having avoided pre Christmas discounting and analysts are upbeat in their forecast for M&S sales saying that there will be a significant improvement in margins. HMV will report its figures on Thursday and has already revealed that like-for-like sales at its music and DVD stores were down 11.5 per cent in the three months to September 24th.

Fast fashion continues to flourish

With Christmas near, analysts remained upbeat on fast-fashion's prospects, saying they stand to profit from cost-conscious European shoppers. Both Inditex, parent of Zara, and H&M have built steam over the last couple of months in a challenging retail environment. Inditex last week reported a 26 percent gain in third-quarter net income on sales that gained 20 percent. H&M reported an 11 percent gain in November sales.

"Zara offers the right trends and has adapted to climate changes, this is good for sell-through," wrote Morgan Stanley's Claire A. Kent in a report last month that upgraded the bank's outlook on the Spanish firm. "Our higher confidence on Zara's like-for-like sales performance stems from the fact that we believe Zara has offered the right trends this season - for women, that's men's military, black and short trousers," she added. Lehman Brothers said H&M is well placed to resist factors that may adversely effect consumer spending in Europe , including the European Central Bank's decision to lift interest rates by a quarter point to 2.25 percent.

"We believe H&M's low-price positioning will enable it to withstand the potential squeeze on disposable income and may help the company benefit from customers trading down," Lehman Brothers said. Shares of Inditex have gained more than 15 percent since January, while H&M's shares have jumped some 13 percent over the same period. Paradoxically, luxury in Europe also is accelerating, with leading European luxury houses reporting gains across the continent after several seasons of tepid sales.

As the market continues to polarise between the high and the low - with the middle squeezed - among the most interesting retail phenomena is customers' increasing readiness to mix luxury with disposable chic. Source: WWD

29 December 2005

Discounts to tempt shoppers

High street shoppers have begun efforts to tempt shoppers into making more Christmas purchases by cutting prices. Last weekend Debenhams offered customers a 20 percent discount, while Marks and Spencer introduced a three-for-two gift offer and Boots on Bond Street offered cardholders extra advantage points. Many other retailers are employing similar stunts.

According to the FT, these controlled reductions and offers are very different from last year's early reductions in a desperate bid to discard unwanted stock. And although this year may be more challenging for retailers than last year, it is not to say that this Christmas will not be successful.

Although official figures have shown that sales figures for the three months to November were only up 2.2 percent on last year, with the annual growth rate dropping from 5.6 percent last year, retailers appear to be better prepared for difficult conditions. "There is lower sales growth year-on-year than last Christmas, so in that sense it will be worse for retailers," Richard Hyman of Verdict Research told the FT. "However, the end part of this year will be the best part for sales growth. What this suggests is that retailers are used to low levels of growth and have planned accordingly."

Despite all the sales stunts employed by retailers to entice shoppers, we will have to wait until January for trade updates. The FT predicts "grim reading for some retail investors". According to FootFall, the number of shoppers last week had dropped 9.9 percent from last year, while in the five weeks until last year, shoppers numbers were down 3 to 5 percent.

Those to be hit hardest will certainly be knocking percentages off prices in the hopes of salvaging what has been lost. Loss-making French Connection has started advertising 50 percent discounts, while fashion chain Hobbs has begun offering products at 30 percent off.

20 December 2005

Christmas consumption on the rise

There aren't many shopping days left until Christmas, but according to the Guardian, by next Saturday every person in Britain will have spent about £366 each buying gifts. It's up £32 on last year, in line with a trend in recent years that is much to the delight of retailers as the money keeps rolling in. It's a fair bet that under millions of Christmas trees will be clothing - 74% of us say it's on the present-shopping list - such as jumpers, trousers, shirts, underwear, scarves.

For frazzled parents, shops such as Primark offer a bonanza of spectacularly cheap clothing. You can do a bulk-buy of presents for a brood of children in one trip and still have change from a £50 note. Those seams might unravel before too long, but it looks glam enough to last the Christmas holidays. The details - the stitching and embroidery - come at ridiculously low prices.

Now fast forward to next Christmas or the one after. By then the chances are that a huge proportion of these Christmas presents will already have been thrown out. The worst possible scenario is that some of this mountain of clothing will be rotting in landfill sites. The British throw about a million tonnes of clothing straight into the dustbin every year, and only 10% of our discarded clothing is reused here. Some will go into car-seat filling, but it is more likely to be shipped by the tonne to developing countries, many in Africa, as part of a huge global trade in second-hand clothes.

The roads through the barrios - shanty towns - of Maputo, Mozambique, are lined with stalls selling second-hand clothes. In one area carts are lined up alongside each other full of trainers. A bit further along there are racks of jeans, and beyond, more racks of shirts and T-shirts. It goes on for mile after mile like some sort of drive-through open-air shopping mall. Curtains, pillowcases, duvet covers, towels - you name it, every kind of textile and footwear is on sale here.

Put aside the qualms about Africa dressing itself in western castoffs and what's the problem, some ask. On the positive side, a lot of people in Asia get jobs making the clothes; westerners get a few months or a year of the novelty of a new style and then pass it on; a Mozambican gets a still-decent piece of clothing at a cost she can afford. The big problem is the west, greedily consuming two-thirds of the annual $1 trillion of clothing produced globally. Perhaps the global trade is rigged to provide us with Christmas miracles?

Reserved spending for Christmas shoppers

Shoppers have under-performed expectations with a small rise week-on-week increase in footfall of just 2.2% and a drop of 3.7% year on year.Natasha Burton at FootFall said "The fall was not unexpected as it has followed the trend we suspected may emerge this month. The promotional incentives used by retailers over the first few weeks in November were successful and brought shoppers into stores to start their Christmas shopping early. This has made it harder to sustain levels outside of these periods and has in turn lead to quieter interim weeks, with consumers waiting to see whether any better offers are around the corner.

"The widely publicised snow predictions may have contributed to the footfall levels we have been seeing. Prospective shoppers who heeded forecasts may have postponed their shopping trips, comfortable in the knowledge that they have taken full advantage of the offers in the last few weeks and that Christmas is far enough away to fit in their shopping at a later date.

"The weekend fared particularly badly compared to 2004 at a decrease in footfall levels of 6.5%. This has confirmed that it is mid-week shopping and the attraction of late night shopping that is keeping the index as a whole at its present level. "However, it's too early to predict doom and gloom. Retailers have enticed shoppers into stores in the early Christmas run-up, and now they cannot afford to rest easy in the last crucial four shopping weeks. People have now had their last pay packet before Christmas and we expect that the retailers' efforts to entice shoppers, with special deals and offers, will pay off in the long run, as the reality of just four weeks to Christmas starts to hit home!"

Online shopping spark catalogue popularity

New research from Royal Mail has revealed that online retailers are increasingly relying on catalogues to drive new and existing customers online this Christmas. With a buoyant Christmas period for e-retail predicted - IMRG (Interactive Media in Retail Group) predicts £5 billion will be spent online in the run up to Christmas 2005- the survey of over 20 leading online retailers including John Lewis Direct and Firebox.com revealed catalogues as one of the most effective promotion channels for generating online orders. More than half of the retailers surveyed (60%)* currently send catalogues or brochures to customers to drive online sales and the use of catalogues by retailers has been multiplying over time, with over half of the retailers questioned for Royal Mail using them as a sales and marketing tool for upwards of five years.*

Attracting new customers and informing them about last order dates are two of the main ways that catalogues can be used to a retailer's advantage. In addition, with 55%* of retailers planning to encourage shoppers to buy online earlier this year in order to extend the Christmas buying period, catalogues are crucial in enticing them online in a timely fashion.

Consumers are enthusiastic about using catalogues and a Royal Mail survey revealed that more than a third of consumers, 36%**, agree that having an online catalogue to browse through makes them more likely to purchase something from a retailers website. John Ashton, Marketing and Development Manager, John Lewis Direct comments: "For us specifically one of the biggest drivers without a doubt is the catalogue. What you are doing is flagging the final dates people can order, trying to take away some of this last minute demand by actually giving people an incentive to order early."

Richard Roche, Head of Multi-channel Retail at Royal Mail, said: "Online retailers recognise the importance of utilising all customer communication channels at this key time of year. Catalogues are important as they provide an effective route to point of purchase and are key to attracting new customers online." He continued: "We predict we will deliver 70 million goods ordered online in the run up to Christmas and have been working closely with retailers to plan for the festive period and ensure we provide a high level of service to their customers."

Preference for online Christmas shopping

UK consumers will be doing their Christmas shopping online this year, according to the latest GMIPoll, which recently surveyed 17,000 consumers across 18 countries. The poll, powered by integrated market research solutions provider GMI, also revealed that Christmas shopping habits are quickly spreading to large, emerging consumer markets, such as China, India and Russia. The survey confirms the global significance of online shopping this holiday season.

The majority of UK consumers (61%) selected the internet as their first destination for Christmas presents shopping, with speciality department stores being their second preference at only 22%. In the survey, the UK leads the pack of nations surveyed for online shopping - for example, 46% of U.S. respondents preferred online retail whilst countries like Denmark, Italy and Spain still prefer brick-and-mortar stores. The Brits will be shopping late this year, with nearly half of them (48%) starting their purchases in December and 2% on Christmas Eve. In the survey, half of UK respondents say the promotion of Christmas merchandise in October is too early, indicating a counterproductive move on behalf of retailers.

Countries such as the Netherlands and the USA declared intentions of spending less. Globally, Christmas is regarded as a time for family (47%) rather than a religious holiday (25%). For the Brits, the family tradition over the Christmas/holiday season is about staying at home (68%) rather than visiting relatives (25%). Dietmar Walter, managing director, Europe for GMI, commented on the results: "Our poll confirms that for the Brits,like many other consumers in the world, online shopping has become a quicker and more convenient alternative to facing crowds on the street at this busy time of year.

What's interesting to me is the global power of marketing, with Christmas being celebrated as an end-of-year holiday with gifts in major developing consumer markets of totally different ethnicities, such as China, India and Russia".

Retailers expecting poor Christmas trading

Retail industry leaders are downbeat about the prospects for the High Street over the next twelve months. According to a survey of over 180 senior retail executives at Barclays fifth annual Retail Industry Forum held in London on Thursday, 50 per cent of retailers feel pessimistic or very pessimistic about the outlook for the retail sector for the next 12 months, with only 13 per cent remaining positive, the remainder being neutral.

50 per cent of retailers feel that the prospects for trading this Christmas are poor or very poor, compared to 2004, with only 10 per cent of those surveyed predicting that trading this Christmas will be good. Just over half (51%) of those surveyed anticipate that they may need to go on sale in the week before Christmas with the remainder not intending to do so until the New Year. Three quarters of those surveyed believe that retail prices are set to fall further in the next six months. The general feeling is that prices will fall up to 5 per cent.

While 2005 was somewhat quieter for leveraged transactions, the expectation is that private equity investment in the retail sector will improve in 2006. 34% of retailers surveyed think private equity investment in the retail sector will improve in 2006, whilst 46% think it will remain similar to 2005 levels. Paul Clarke, National Director, Retail and Wholesale sectors, Barclays says: "The survey results are not a surprise. These are tough times for the retail sector but Barclays is very supportive of its customers and we understand the challenges and issues they currently face. Barclays' industry expertise has been useful in seeking solutions going forward. However, it is not all gloom and doom - it is important to recognise that many retailers are showing remarkable resilience.

"The retail sector is entering the crucial Christmas trading period in a less confident mood than in recent years with doubts lingering about the strength of consumer spending. With the dollar likely to strengthen further retailers should be taking a good look at their foreign exchange risk management strategies."

11 October 2005

Christmas In The Windows

London's department stores are already in festive mode with Christmas window displays in full bloom. The first store was Harrods, followed by Liberty, Harvey Nichols and Selfridges.Harvey Nichols theme is white Christmas while Liberty's is based on the idea of indulgence. Selfridges has chosen Christmas stories as its theme, including A Christmas Carol and The Snowman.

10 November 2004