Next and M&S first victims of retail’s toughest year
The fallout from a punishing winter for Britain’s high street will be laid bare this week when retail stalwarts Marks & Spencer and Next are expected to report tough festive trading.
Retailers have had to battle with a potent mix of unseasonably mild temperatures; heavy rainstorms; Black Friday discounting; and the terrorist attacks in Paris. All have been blamed for dampening shoppers’ enthusiasm.
Britons left their Christmas shopping until the latest point since records began in 1998, according to Ipsos Retail, with footfall only peaking in the three days leading up to Christmas. Despite the late burst of activity, high street visitors were still 1.8pc lower than the same week last year.
In what has already been called the toughest year ever for retail, because of an intensely competitive landscape, this Christmas is expected to put a wide gulf between the winners and losers.
The City expects Marks & Spencer, which was running heavy promotions in the days leading up to 25 December, to be the usual tale of two halves.
Analysts predict its food arm to have notched up stellar sales, luring shoppers with smoked salmon pearl-shaped mousses, jeroboams of prosecco and melt-in-the-middle puddings. However, its general merchandise division is likely to have suffered again.
Nick Bubb, an independent retail analyst, is forecasting a 3pc drop in like-for-like sales, while Fraser Ramzen at Nomura is predicting an even steeper 5.5pc, which would be almost as disastrous as last year’s 5.8pc plunge, when problems at its distribution centre meant it had to suspend deliveries.
While M&S has been offsetting disappointments in sales rises with a tighter grip on profit margins, these could have come under pressure as it tried to clear stock of its winter suede coats and cashmere jumpers.
M&S is also thought to share some of the same middle-aged customers as Bonmarche, which was forced to issue a profits warning before Christmas.
Marks & Spencer’s 2015 Christmas advert
Next, which, unlike its rival, refuses to discount until Boxing Day, is expected to have enjoyed robust trading.
Clive Black of Shore Capital said: “Next always defies gravity when it comes to outperforming the rest. It understands its customers, holds firm when it comes to not discounting and then shoots the lights out for the sale.”
Next warning of ‘cooling demand’ hits retail shares Next expects shopper to become increasingly cautious this year
However, analysts at Jefferies cut their fourth quarter sales forecasts for Next to 4pc, down from last year, when they forecast 7.6pc growth. Next had lifted profit guidance by £5m for the full year before the festive season.
John Lewis is also due to update on Christmas trading on Wednesday. Its most recent weekly sales report for the period to Boxing Day shows that more shoppers than ever chose to escape the crowds and shop online, boosting total sales by 2.3pc. However, its stores experienced sluggish trading