Unhappy Christmas for retailers

Festive season sales rise fails to match inflation, although online growth continues

Retailers only managed to eke out a disappointingly small rise in sales in stores over Christmas, even though they enjoyed a surge in online revenues last month.

Chains grew sales at stores open at least a year by just 0.3 per cent in December, according to the British Retail Consortium (BRC) and KPMG.

Helen Dickinson, the director general of the BRC, said: "Against the relentlessly tough economic backdrop and low expectations, these results are not a cause for celebration, but not a disaster either. Total growth for December hasn't beaten inflation and is only on a par with December 2010, when severe weather put sales volumes on ice for much of the month."

While footwear, fashion, and health and beauty retailers enjoyed a robust December, those selling home accessories, toys and furniture had a Christmas to forget. Food retailers only managed anaemic growth of 0.3 per cent, in the latest sign of tough trading in the grocery sector. Despite the boost from new stores and inflation, total retail sales grew only 1.5 per cent last month.

While the numbers are in sharp contrast to the booming 13 per cent leap in Christmas sales posted by the department store John Lewis, this week's figures from Marks & Spencer, JD Sports Fashion, Tesco and Sainsbury's are more likely to mirror the BRC's data.

Online retail sales rocketed by 17.8 per cent last month, which was the fastest growth since December 2011, said the BRC.

Ms Dickinson said: "Online was the stand-out performer. Consumers are increasingly taking advantage of the convenience that online shopping offers at every stage of the customer journey, from comparing prices to reserving and collecting in-store."

David McCorquodale, the head of retail at KPMG, warned of a challenging start to the new year for retailers. He said: "January will be a tough month for retailers as consumers face up to their credit card bills after Christmas, and it's likely 2013 will bring more of the same challenges. There will be no boom and it's likely more than a few will go bust."

Grocers: Morrisons lagging in the supermarkets race as it sees its worst sales for eight years

Morrisons had a Christmas to forget after the supermarket chain posted its worst sales for eight years and admitted it was losing market share to the discounters Aldi and Lidl.

The Bradford-based grocer posted a 2.5 per cent slump in like-for-like sales over the six weeks to 30 December, which all but confirmed its status as the worst festive performer among the big four supermarkets. Morrisons described its performance as "disappointing" and its falling sales ares expected to contrast with a small rise in underlying revenues at its listed rivals, Tesco and Sainsbury's later this week.

This was the weakest trading from the UK's fourth-biggest supermarket since 2005, when it was recovering from its troubled acquisition of Safeway in 2004.

Morrisons has been struggling from having only a handful of smaller convenience stores and no online grocery offer, which are the two fastest-growing areas of the market. The grocer admitted it needed to improve its marketing, such as better promoting its large numbers of butchers, bakers and fishmongers in stores.

Dalton Philips, the chief executive of Morrisons, said: "We have been losing market share to the discounters – all the quoted retailers have been. They [Aldi and Lidl] are a strong growing force in the market." Aldi and Lidl grew sales by 27.3 per cent and 11 per cent over the 12 weeks to 25 November, according to Kantar Worldpanel.

Shares in Morrisons were down only 0.8p at 256.1p yesterday, largely because the City was relieved that its sales were not as bad as had been feared and there was no profit warning.

Analysts expect Morrisons to post a 2 per cent fall in pre-tax profits to £913m for the year to February. The grocer's bottom line has also been dented by a higher interest bill from its two-year programme to buy back £1bn of shares, which is nearly complete.

Total sales fell by 0.9 per cent over the six weeks, and it expects trading conditions in the grocery sector to remain "difficult" this year.

Mr Philips remained tight-lipped about the supermarket's expected plans to launch online grocery, but said it would update the market at its full-year results in March. He added: "It is the fastest-growing area in the market, and it clearly has an impact on our sales by not being there."

Similarly, while Morrisons has only 12 M Local convenience stores now, it plans to open 70 this year. Of these, 50 will be in London and the South-east, with the first M Local to open in Ealing in February

Morrisons last week hired the TV duo Ant and Dec in a deal that will see the supermarket sponsor ITV's Britain's Got Talent and Ant & Dec's Saturday Night Takeaway shows this year. The Geordies will front a major advertising campaign on its fresh food credentials. Mr Philips said: "No one else bakes, creams, fillets, cuts, slices and dices more than us and we need to be more effective at marketing this. We need to shout about it."

Morrisons yesterday promoted Nick Collard to be its group marketing and customer director, elevating him on to its management board. Greg McMahon, the retailer's company secretary, is leaving the grocer to take the same role at the pub group Mitchells & Butlers.

But industry experts feel Morrisons has lost momentum. Joseph Robinson, at the retail consultancy Conlumino, said: "Unfortunately for Morrisons, it has found itself squeezed in a market characterised by falling customer loyalty and low volume growth... Furthermore, the prevailing northern bias of its store portfolio has left it more susceptible to the general economic malaise."

Department stores: House of Fraser lifts non-food showing with a festive record

House of Fraser has become the latest department store chain to post record sales over Christmas, pointing to better-than-expected festive trading for most non-food retailers.

The 60-store chain said the strong performance means it is on track to grow underlying profits to more than £60m for the financial year ending this month, but added it "remains difficult to predict" when consumer sentiment will improve. House of Fraser grew its sales at stores open at least a year by 6.3 per cent over the six weeks to 5 January.

The listed department store Debenhams is expected to unveil robust Christmas trading tomorrow, while underlying sales powered ahead by 13 per cent at rival John Lewis over the five weeks to the end of December.

House of Fraser's chairman, Don McCarthy, said: "We are pleased to report another record performance."

Fashion: Debt-hit New Look's lift as its revival continues

New Look has hailed an uplift in sales over Christmas, continuing the recent improvement in the debt-laden fashion chain's performance.

New Look, which has debts of more than £1bn, said that its gross profit margins were also "significantly ahead of last year", which the retailer attributed to tight management of stock, lower markdown and less promotional activity.

The private equity-backed chain said UK like-for-like sales rose 3.7 per cent over the 14 weeks to 29 December.

Separately, the premium shoe retailer Oliver Sweeney credited its London store in Covent Garden for helping sales rise 5.3 per cent over the five weeks to 30 December.

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