Mixed Christmas fortunes for retail

 

Christmas has emerged as a divisive season for the retail sector, with some players turning in a better-than-expected performance - while others moved closer to the edge.

A "dazzling" week before Christmas helped like-for-like sales rise 2.2% in the crucial month, their strongest since January, according to a key survey by the British Retail Consortium (BRC) and KPMG.

High street bellwether Marks & Spencer reported robust sales over the festive season with its food department compensating for weaker growth in clothing and home, while Debenhams also reported a surge in trade in the final week before Christmas.

But at the other end of the spectrum, outdoor clothing group Blacks Leisure and lingerie chain La Senza were bought out of administration after weeks of dire trade and video games retailer Game warned it will breach a banking agreement after sales plunged.

There had been fears that the retail sector was heading for one of its worst Christmas trading periods to date, but upbeat statements from the likes of department store John Lewis have offered some balance to the bleaker outlook at chains such as HMV.

The BRC survey said sales of clothing and footwear had "a pretty spectacular month" following dire trading in the autumn's mild weather while food sales enjoyed their strongest growth for a year on the back of special offers.

But big-ticket items, including furniture and TVs, continued to suffer in December amid weak consumer confidence.

However, the upbeat figures will not ease fears over the struggling sector's future.

Helen Dickinson, head of retail at KPMG, said: "Sadly, no-one expects this level of demand to be indicative of the year ahead."

M&S saw like-for-like food sales increase 3% in the 13 weeks to December 31, against City expectations of a 1.5% increase, as it pulled in customers with promotions and 600 new product lines.

But the company saw general merchandise sales drop 1.8% on a like-for-like basis as its decision to pull technology products from its shelves hit home sales.

Game was the major high street casualty of the day after the video game retailer warned it would breach a banking covenant - a promise made to creditors to secure a loan - if current market conditions continue.

The group recorded a 12.9% decline in like-for-like sales in the eight weeks to January 7 and a 10% drop in the 49 weeks to January 7, as a "double whammy" of a lack of new consoles and a squeeze in consumer spending hit the business and wider market.

But Game chief executive Ian Shepherd remained confident. He said: "It's a cyclical industry. It will return to growth as new consoles come to the market.

"I'm very confident that the games industry is here to stay. We've got to be realistic - we're at a low point in the cycle that doesn't mean there's not plenty of future growth left."

PA

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