Where next for High Street retail?

Christmas High Street sceneAs the figures for pre-Christmas trading are appearing a clear divide is emerging in performance between non-food and food sales performance.

This is supported by Next reporting that sales fell by 0.4% compared to 2015.

However, as predicted, Marks & Spencer and John Lewis also reported increased sales in non-food items.

Discount retail posted the biggest gains.  B & M, which offers a range of household, DIY, furniture, clothing and other items, has reported a 7.2% rise in like for like sales during the three months up to December 24.

Perhaps predictably, however, online buying continued its inexorable upward trend by +19% according to BDO.

High Street shopping remained relatively quiet until the last week before Christmas, with analysts suggesting a variety of explanations ranging from Christmas falling at a weekend, giving a full week for “last minute” shopping, to consumers being more careful about their spending, to the Black Friday hangover and inevitably to the rise of online shopping.

Overall, retail analysts at BDO are predicting a slight fall overall in High Street retail trade in Dec 2016 after a significant fall of 5.3% in Dec 2015.

Less discretionary spending and more on “essentials”?

Interestingly, the food retailers have generally experienced increased sales in the pre- and post-Christmas period. Again, it was the discount end that did best with Aldi reporting sales up by +15%, and Lidl by +10%.

But of the “big four” supermarkets that have so far reported, sales were also up, at Sainsbury by .1%, largely fuelled by its Argos operation, at Tesco by 1.8%, at Morrison by .2%. Marks & Spencer, too, reported increased food sales, up by.6%.

Can retailers relax a little in 2017?

Despite the slightly more positive Christmas picture compared with 2015, this year retailers will still face several pressures as higher import prices thanks to a devaluing £Sterling feed through and hit both their costs and consumers’ income.

Food prices are expected to rise but so also are clothing, a great deal of which is manufactured outside the UK. What happens to oil prices will also play its part in increased transport costs and the price of petrol at the pumps reducing discretionary spending.

Two significant costs that may also affect High Street retail are the effect of Quarter day rents due at the end of December and the impact of business rate revaluations due to come into effect in April. While the latter may benefit smaller independents if may hit the larger stores hard. Given also the ongoing Brexit uncertainty inhibiting investment, will we see another BHS-style High Street name collapsing?

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