Will high street retailers survive the post-Christmas shopping comedown?

The latest sales figures point to a happy Christmas on the high street, but the size of the discounts, the threat from online and unseasonably warm weather tell a more sobering story. Simon Neville asks which way it will go at the shops

Festive cheer on Oxford Street, the capital’s shopping hub. But retailers fear that rising sales are being achieved at the cost of profits amid steep discounts (PA)

Good news! The high street has recovered! Any fears that there were any problems with shops and shopkeepers were wildly overplayed – and if things continue as they are then we can expect a super, tip- top Christmas.

At least that is what the Office for National Statistics (ONS) would have you believe based on its latest retail sales figures for November.

According to Britain’s official number-crunchers, sales volumes – the amount of stuff purchased – were up 5 per cent year on year in November, and up 1.7 per cent on October.

Online was particularly strong – rising 12.7 per cent year-on-year, and 4.9 per cent on October. And the momentum should, in theory, continue through December.

But how helpful are the figures and can they give a true indication of what Christmas has in store for the UK? As the independent analyst Nick Bubb pointed out: “The ONS figures are a bit brighter, although they are not the gospel truth and can be revised... It’s still tough out there on the high street.”

Most analysts and commentators who follow the retail sector reckon the ONS numbers can actually be relatively unhelpful; they prefer to follow the information provided by organisations like the British Retail Consortium, or the Springboard footfall figures.

The sales figures from the BRC were relatively in line with the ONS data, but as the bosses of the UK’s biggest supermarkets will tell you, sales volumes mean nothing when you are in the grip of a price war and the amount of money coming through the tills is actually declining.

The key for the high street will be playing on the theatre of the Christmas shopping experience

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The most recent Kantar Worldpanel supermarket data for the three months to 6 December showed prices were down 1.9 per cent – against a 1.7 per cent drop in the three months to 6 November.

Footfall also dropped in November by 2.1 per cent year on year, significantly down on the 0.2 per cent decline in October and below the three- month average of a 0.8 per cent decline.

Retailers are hoping to find the Amazon touch in-store (PA)

David McCorquodale, the head of retail at the accountancy firm KPMG, explained: “In December the high street will be hoping to recreate the hype of the online sales – in-store. The key will be playing on the theatre of the Christmas shopping experience, which will hopefully leave consumers’ pockets jingling all the way to the tills.”

But retailers are still cautious. According to the accountants Deloitte, the average discount is 41.8 per cent, and this is set to rise to 45 per cent by this weekend – which will be the deepest pre-Christmas discounting since 2008.

Many are also still trying to work out whether Black Friday was the peak of Christmas trading – like it was last year – or whether the hype died down this year and people are leaving it, as they traditionally have done, to the last minute.

With Black Friday falling in November – and on payday for many workers – some have suggested that it could just have been an opportunity for customers to snap up a bargain for themselves, rather than buy presents for loved ones.

And with the high expectations that consumers now have for online shopping, many are leaving it to the last minute for internet orders – safe in the knowledge that next-day, and in some cases same-day, delivery will not fail.

Christmas falling on a Friday will also help ease delivery fears, with almost a full working week to place orders in the lead-up.

Ian Geddes, the head of retail at Deloitte, explained: “In order to maximise margins, retailers will require innovative marketing strategies and the supply-chain capability to meet consumer demand for faster and flexible delivery options.”

And there lies a problem – not every retailer can count on having a superbly strong supply chain and store offer, meaning the most likely outcome will be a split between winners and losers.

As retail analysts Jonathan Pritchard and John Stevenson at the broker Peel Hunt said: “The consumer is happy, disposable incomes are rising and the conditions had looked well set for a good retail Christmas, on paper at least.

“However, shoppers appear to be spending more on experiences rather than goods, and the build-up to peak has been competitive [the weather hasn’t helped], with a wide gap emerging between winners and losers.”

They predict that the winners will include SuperGroup, which had a storming set of results on Wednesday; JD Sports, with its impressive profit upgrade as shoppers demand exclusive Nike and Adidas products; and Asos, which is benefiting from the strong online sales figures.

The loser could well be Marks & Spencer, which continues to suffer from the poor weather and a lack of direction; Sports Direct, which is losing out to JD Sports; and Halfords, which is feeling the pinch from a waning in cycling enthusiasm.

The warmest December in 70 years is certainly not helping clothes retailers, as winter coats and jumpers remain unsold, and the terrorist attacks in Paris last month have also kept tourists away from the big shopping districts – particularly Central London.

But it would not be a Christmas trading season without some doom and gloom from the retailers, because, when all is said and done, it is much easier to explain away poor results when expectations are low than be forced to admit defeat after months of tub-thumping rhetoric.