For the last few years it’s seemed that Christmas takings on the high street have continued to fall as rents rise, business rates increase and wages drive up the cost of running physical stores while shoppers increasingly spend online. Only last month Sports Direct boss Mike Ashley said “November was the worst on record, unbelievably bad…No one could have budgeted for that. Retailers just cannot take that kind of November. It will literally smash them to pieces.”
Sara Fisher, Business Lecturer at The University of Law Business School said “The high street is facing a number of challenges. As with the last few years, internet shopping is on the rise and taking business away from physical shops, wage stagnation continues and then we’re facing the uncertainty of Brexit. All of these things will have an impact on how retail prospers over the Christmas season.”
With retail facing a difficult winter we decided to look at how the high street has been impacted by Christmas 2018.
Marks & Spencer
Marks & Spencer reported like-for-like sales (excluding new stores) were down 2.2% in the 13 weeks to 29 December. Food sales fell 2.1% and its clothing and home sales dipped by 2.4%. This is slightly worse than the 1.6% fall which analysts predicted for the company overall but better for their food department.
Steve Rowe, chief executive for Marks & Spencer, said “The combination of reducing consumer confidence, mild weather, Black Friday, and widespread discounting by our competitors made November a very challenging trading period. However, overall our 13-week performance was steady with some early encouraging signs.”
HMV was one of the last business casualties of 2018 after it went into administration in the final days of December, putting 128 stores and approx. 2,000 employees at risk.
Paul McGowan, executive chairman of HMV is reported as saying: "During the key Christmas trading period the market for DVD fell by over 30% compared to the previous year and, whilst HMV performed considerably better than that, such a deterioration in a key sector of the market is unsustainable.
"HMV has clearly not been insulated from the general malaise of the UK high street and has suffered the same challenges with business rates and other Government-centric policies which have led to increased fixed costs in the business.
"Business rates alone represent an annual cost to HMV in excess of £15 million. Even an exceptionally well-run and much-loved business such as HMV cannot withstand the tsunami of challenges facing UK retailers over the last 12 months on top of such a dramatic change in consumer behaviour in the entertainment market.
John Lewis reported sales were up 4.5% in the week to 29 December compared with the same period last year. Sales also rose 4.2% in the preceding week. Their sales in the seven-week Christmas period were 1.4% higher than for the same period last year. This all sounds positive but the company admitted that it may not be enough to secure a bonus for its staff this year, due to the full-year profits expected to fall substantially.
Next’s high street sales fell by 9.2%, while online sales rose 15.2% as shoppers hit the internet. Saved by these digital shoppers, the company reported overall sales growth of 1.5% for the last two months of 2018. However, Next was one of the few large high street retailers to resist slashing prices pre-Christmas and a late surge in online demand helped Next to increase sales later in the Christmas period.
Tesco had a self-proclaimed “strong” Christmas. Like-for-like sales (excluding the impact of new stores) were up 2.2% at its UK stores, making it their best Christmas since 2009. It outperformed rivals in food, clothing and general merchandise.
Chief executive Dave Lewis said: 'As a team we have achieved a lot in the last 19 weeks. In the UK we delivered significant improvements in our competitive offer and this is reflected in a very strong Christmas performance which was ahead of the market.'
Debenhams has been hitting business headlines for the last few years and not for the right reasons. The department store chain has struggled financially and this Christmas has proved no exception. Debenhams reported a fall in sales during the Christmas trading period and a 5.7% fall in like-for-like sales in the 18 weeks up to 5 January. Sales in the UK slumped 6.2% over the festive season while international sales dipped 3.5%.
The retailer said that it has "put on hold any further asset disposals until the outcome of those discussions is known". Sergio Bucher, chief executive of Debenhams admitted the company is in talks with its lenders about its £520m credit line. So far, 50 stores are planned for closure.
Overall, it’s been another testing Christmas for the UK high street. The retail research group Springboard have reported sales across all major store categories declining by -5.6% in December 2018 from December 2017. The greatest loss was found within fashion and accessories with -9.3% and the only increase was the food and beverage sector with +0.8%. The BBC reported that total retail sales showed 0% year-on-year growth during the month, the worst December performance since 2008.
News outlet are reporting that the high street suffered its worst Christmas in a decade in 2018, with Sainsbury's, John Lewis, Mothercare, Halfords and many more all reporting disappointing sales in the final few weeks of the year. The uncertain economic climate due to Brexit and a mild winter (especially for seasonal clothing) are being held responsible for the downturn.