Press Room
Christmas 2007 generally disappointing for UK retailers;
sales of computer games and DVDs buck the trend
- Household/homeware worst performing retail subsector as
consumer confidence dips
- DVD and computer game sales a highlight in other disappointing
growth figures
- Results in line with ONS December Christmas retail statistics,
released today
The festive season has proved anything but for the UK retail
sector this Christmas, with average like for like sales growing
just 1.7% during the Christmas retail period compared with 3.1% in
the same period last year, according to Grant Thornton's Review of
Retail Christmas trading updates*.
There was also a decline in the number of businesses reporting a
like for like increase in sales, from 32 in 2006 to 27 in 2007, and
a slight increase in retailers reporting a sales decrease during
the Christmas period (from 10 in 2006 to 11 in 2007). Seven
retailers also issued profits warnings as a result of poorer than
expected trading post-Christmas, compared to three last year.
The average like for like sales increase reported by the 38
retailers included within Grant Thornton's Retail Christmas Trading
Update Survey was 1.7% (compared to 3.1% last year), with the
entertainment sector (principally computer games, books, CD/DVDs)
reporting the highest average like for like sales increase at 14.7%
and the household/homeware sector reporting the lowest like for
like sales increase at -3.8%
The household and homeware sector featured the two worst performing
retailers over the Christmas period; Land of Leather and SCS
Upholstery. With drops in like for like sales of 25.5% and 16.0%
respectively, the results show homeware, and in particular the
furniture market, is certainly feeling the impact of a drop in
consumer confidence.
In contrast the entertainment market has made a strong showing,
growing by an impressive 14.7% in like for like sales against the
same period last year, led by the three highest performing
retailers, Game Group, HMV and Zavvi (30.3%, 14.1% and 10.2%
respectively).
David Bush, Head of Grant Thornton's Retail Services team, says
that the entertainment sector was by far the best performing sector
as consumers identified the 'must have' presents as the Nintendo,
Wii and DS Lite consoles.
"Related software and DVD sales, new release driven, were also
attractive to consumers making this the strongest performing sector
over the Christmas period," Bush said.
Bush said the decline in consumer confidence was now directly
impacting on high ticket and discretionary purchases, a fact that
was immediately apparent when examining the household and homeware
sector. However, retailers that have developed their internet offer
in addition to their overall product range had proved that there
was still some buoyancy amongst individual retailers.
In reflecting upon the trading patterns experience during the
Christmas period, it was evident that difficulties in the housing
market and significant rises in domestic fuel bills and petrol
prices had certainly had an effect, according to Bush.
"A large number of retailers highlighted how sluggish trading was
not only in November but also the majority of December up to
Christmas. SPSL** highlighted that number of shoppers in December
2007 was 3.2% lower than the equivalent period in 2006. Given the
lack of footfall, a number of retailers opted to drive trade by
going 'on sale' before Christmas."
Bush said there was also a polarisation between retailers who held
off from unplanned promotional activity pre-Christmas and therefore
maintained gross margins but lost revenue (eg Next and Marks and
Spencer) and those who opted to cut selling prices and achieved
positive year on year sales increases as a result (eg JJB
Sports).
"Christmas 2007 was not the disaster that many feared. However the
average overall increase in like for like sales was disappointing,
and much of that sales increase was only achieved by significant
promotional activity. Retailers polarised into those who opted for
the strategy of holding prices and those that discounted early. In
our view it is unclear whether one strategy actually succeeded over
the other," concludes Bush.
* The findings and conclusions contained in this survey follow the
analysis of 39 trading updates issued by UK retailers since 3
January 2008.
** SPSL is the largest European provider of proprietary tools
for high accuracy customer traffic and behavioural analysis
deployed in retail stores.