Festive freeze hits sales across the high street
Tuesday 11 January 2011
The full impact of last month's snow on festive trading was laid bare yesterday in a key survey, as the department store chain Debenhams said it lost £30m of sales to the weather.
Also yesterday, the grocer Morrisons delivered a solid 1 per cent rise in like-for-like sales, excluding VAT and fuel, supporting the view the supermarkets had a good Christmas. But in the first clear snapshot of festive trading, the British Retail Consortium and KPMG survey found that underlying sales fell by 0.3 per cent in December. Stephen Robertson, the director general of the BRC, said: "The unusually early winter weather made a difficult Christmas worse. With mounting concerns about the impact of spending cuts and the wider economy, sales growth has been weak since last summer." December's sales compare with growth of 4.2 per cent for the same month in 2009, although this was flattered by a dreadful December 2008 during the recession.
While last month's snow dampened trading for all retailers – with the exception of Blacks Leisure, which did a roaring trade in warm jackets – the true depth of its impact has divided opinion in the retail sector. The big department store chains, John Lewis and House of Fraser, posted strong sales over Christmas, but other retailers from the maternity specialist Mothercare to the entertainment group HMV blamed the severe weather for profits warnings.
The BRC said total sales, which include the contribution from new stores, rose 1.5 per cent in December, although there were clear winners and losers. While food growth slowed a little, non-food had a "much tougher time", with consumer fears over jobs and incomes hitting sales of big ticket items in particular, said the BRC.
Helen Dickinson, the head of retail at the accountancy firm KPMG, said: "December is the biggest month of the year with volumes 20 per cent to 30 per cent higher than other months. Very disappointingly, without the impact of the arctic weather the results would have been noticeably better."
On the ground, Debenhams delivered a 1.3 per cent fall in like-for-like sales for the 19 weeks to 8 January.
But Rob Templeman, the chief executive of Debenhams, said the snow had hit trading in its department stores, particularly in Scotland and Ireland. On some snow-affected days, sales at certain stores fell by up to 97.5 per cent to just £10,000, compared with £300,000 to £400,000 last year.
Overall, Debenhams said severe weather shaved between 2 per cent and 3 per cent off its like-for-like sales. But the retailer, which has 166 stores in the UK, the Republic of Ireland and Denmark, said its gross margins were ahead of last year. Mr Templeman said: "Sales are for vanity, profits are for sanity. The acid test is whether you convert sales to profits." Numis Securities maintained its full-year profit forecast for Debenhams at £168m.
Meanwhile, Morrisons said its total sales, excluding fuel, grew by 3.1 per cent over the six weeks to 2 January. The grocer hit back at suggestions it was losing market share to rivals Tesco, Sainsbury's and Asda. Richard Pennycook, the finance director of Morrisons, said it would have the "biggest profit increase of the big four" this year. Morrisons is expected to post pre-tax profits of between £860m and £865m.
The online specialist Shop Direct, which operates the Littlewoods and Very brands, delivered sales up 5 per cent for the six weeks to 31 December.
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