Belfast Telegraph

Why Next appears to be the exception to a good year for retail


By Donald McFetridge, Independent Retail Analyst

Every January, retail analysts like myself look forward to finding out exactly how good or bad trading was for retailers over the festive period, and every January there are always winners and losers.

This year has been no exception but, on the face of things, retail trading results have been surprisingly - indeed exceptionally - good, especially in light of the fact that we are living in very uncertain economic circumstances with Brexit looming, Trump entering the White House, a weak pound and the prospect of rising inflation and prices throughout the incoming year.

The retail world is divided into two distinct categories - food and non-food - and it's usually the food retailers who fare best over the Christmas period with consumers spending much more on their groceries than normal due to the festivities.

This year was no exception. Sainsbury's, Tesco and Asda all reported excellent trading results. In fact, Tesco reported that they have grown market share for the first time since 2011 with a record rise in sales.

This year, they reported a very impressive 1.5% like-for-like sales increase for the 13 weeks ending November 26, boosted by strong sales of fresh food.

Sainsbury's (in the 15 weeks to January 7) indicated that their total sales were up by 0.8%, while Lidl (who report differently from the British multiples) also recorded that they had increased their total sales by a record 10%.

Pleasing to note were the NISA results. In the 10 weeks to January 1, NISA had a record Christmas with like-for-like sales up by 2.7%.

It would, therefore, be fair to state that food retailers fared exceptionally well as consumers seemed determined to enjoy a bumper Christmas in the food and drink sectors.

What is more surprising is that even in the non-food sector, we have seen some exceptionally keen sales figures.

Retailers in the clothing sector performed well with even Marks & Spencer managing to stop the rot in their troubled general merchandise lines.

M&S reported a 2.3% rise in like-for-like sales for the 13 weeks to December 31. This is only the second time that M&S has been able to report sales growth in clothing over the past 23 quarters. This must be music to the ears of Steve Rowe and shareholders in the company.

Meanwhile, trading over at Next was very different - and difficult. Lord Wolfson had already signalled that trading figures for the period would not be of the usual high calibre. Total sales in the fourth quarter for the company to December 24, including markdown sales, were down by 0.4%. This must be of extreme concern for one of the bellwethers of the high street.

The mid-market clothing market has always been fraught with difficulties and it appears that this year M&S pulled out all the stops to beat their competitors. However, there is only so much money around and, as a result, there are inevitably more distinct winners and losers within this sector.

Department store groups like John Lewis and House of Fraser also performed way ahead of market expectations, as did Primark where the tills are still ringing, and sales are up by one-fifth thanks to a boost from the Brexit-hit pound.

While the results announced so far have been very pleasing, it must be remembered that 2017 will continue to be a very challenging year for both retailers and consumers.

However, it's not all doom and gloom, as in so many previous Januarys, but retailers must surely remain cautious about what 2017 will bring, as Brexit plans are revealed and other key economic factors and considerations are taken into account.

Belfast Telegraph