Tesco and John Lewis have emerged as festive winners after recording a rise in sales over Christmas – but Marks & Spencer and Debenhams both reported falls.
Tesco’s cut-price deals on ‘Festive 5’ vegetables, lamb and beef joints helped it report a 2.2 per cent rise in UK like-for-like sales over the festive period.
It follows positive results for budget supermarkets this week as Aldi saw sales jump 10 per cent over Christmas after a surge in demand for its premium products.
But M&S said today it had a 2.4 per cent fall in like-for-like clothing and home sales over its Christmas quarter to December 29, while food sales dropped 2.1 per cent.
Like-for-like sales at Debenhams were down 3.4 per cent over the Christmas period as it saw gross transactions fall 3.8 per cent in the six weeks to January 5.
However, Tesco has reported a 2.2 per cent rise in UK like-for-like sales over the festive period as the supermarket unveiled Christmas trading figures.
And the John Lewis Partnership said its sales rose 1.4 per cent to £2.2billion in the seven weeks to January 5, but it still expected full-year profits to fall substantially.
The FTSE 100 index at 8.45am was down 34.51 at 6872.12, while the pound at 9am was $1.2751 compared to $1.2763 at the previous close.
Tesco posted a rise in like-for-like sales in the six weeks to January 5, outperforming the wider market in food, clothing and general merchandise.
The retailer enjoyed its strongest rate of growth in Britain since December 2009 – and had its biggest UK Sunday sales day on record on December 23 last year, serving 766,000 customers in just an hour at one point.
Across both the UK and Ireland, comparable sales were up 2.6 per cent.
Tesco said its ‘Festive 5’ Christmas vegetable offer proved particularly popular with customers.
This sold 19.7 million units over the three weeks to Christmas. Promotions on lamb and beef joints also helped drive sales.
For the third quarter as a whole, Tesco recorded comparable UK sales growth of 0.7 per cent, down from 2.5 per cent in the previous three months – but the 12th consecutive period of positive figures nonetheless.
Over the 19 weeks to January 5, the supermarket saw like-for-like sales grow 1.2 per cent in the UK.
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.’
The results come amid a difficult time for the retail sector, as consumer confidence takes a knock from Brexit worries.
Supermarkets are battling rising costs and fierce competition in the sector as Lidl and Aldi continue their relentless march.
As part of efforts to position the supermarket to meet the challenges of a rapidly changing market, Mr Lewis has forked out £3.7billion to acquire cash-and-carry business Booker.
He also launched Jack’s, a discount chain that will supposedly rival the German discounters. Booker like-for-like sales shot up 6.7 per cent over Christmas.
Mr Lewis added: ‘We have more to do everywhere, but remain bang on track to deliver our plans for the year – and as we enter our centenary, we are in a strong position.’
Mr Lewis said that ‘sensible’ Brexit contingency planning is under way and Tesco is working with suppliers to stockpile goods. However, he sounded the alarm bell over fresh food.
‘It’s hard to contingency for fresh food, where we can’t stockpile. Like other retailers, we’d be keen that there is no friction at the border given the UK imports half of the fresh food it eats.’
Tesco’s update is the latest from the so-called Big Four supermarkets, which also includes Sainsbury’s, Asda and Morrisons.
Morrisons reported strong figures on Tuesday, while Sainsbury’s, which is attempting to merge with Asda, posted a poor set of results yesterday.
Tesco has reported a 2.2 per cent rise in UK like-for-like sales over the festive period as the supermarket unveiled Christmas trading figures
At Debenhams, comparable sales in the UK were 3.6 per cent lower than last year due to weak store footfall.
Debenhams has unveiled declining sales over Christmas, but said it is still on track to deliver on profit expectations.
The high street retailer saw like-for-like sales dip by 3.4 per cent in the six weeks to January 5, weighed down by the UK where sales were 3.6 per cent lower due to weaker footfall.
But the group defied predictions from the City that it would issue a profit warning over the period.
Digital sales rose 6 per cent in the period, despite a slower start to the peak shopping season.
Chief executive Sergio Bucher said the results were the ‘best possible outcome’ in an uncertain time for retailers.
The company warned that the UK trading environment is still ‘volatile’, with savvy consumers actively seeking out discounts.
This will result in some erosion of the retailer’s profit margin in the first half, after it slashed prices to keep up with competitors.
Mr Bucher said: ‘We responded to a significant increase in promotional activity in the market, particularly in key seasonal categories, in order to remain competitive for our customers.
‘We have taken decisive steps to maintain rigorous cost and capital discipline, and I am grateful to my colleagues for their hard work as we maintain a rapid pace of change.’
Debenhams has embarked on a major strategic shift, including the shuttering of 50 outlets and the launch of a new store design concept.
The company said today that the new format stores had outperformed other sites, with the strongest sales increase at Stevenage.
But Michael Mulligan, partner and insolvency specialist at law firm, Shakespeare Martineau, said of the figures: ‘Debenhams’ business has been in long-term decline and the plans implemented last year haven’t worked.
Marks & Spencer has reported a 2.4 per cent fall in like-for-like clothing and home sales over its Christmas quarter to December 29, while food sales dropped 2.1 per cent
‘It is no surprise that its lenders have looked to FTI Consulting to advise on a make-or-break restructuring which is likely to involve the closure of many stores and the loss of thousands of jobs.
‘As hard as it may be, it’s essential for company directors to recognise that their business is failing and put plans in place at the earliest opportunity to react to changing market conditions.’
Marks & Spencer has insisted it is seeing ‘encouraging early signs’ despite further falls in clothing and food sales over its Christmas quarter.
The retail bellwether said like-for-like clothing and home sales dropped 2.4 per cent over the 13 weeks to December 29 while comparable food sales fell 2.1 per cent.
Total clothing and home sales fell by 4.8 per cent as it was knocked by a raft of store closures under its overhaul.
The group said while unusually warm weather and falling consumer confidence made for a ‘very challenging’ November, overall trading in its third quarter was ‘steady with some early encouraging signs’.
M&S also confirmed it remained on track for its full-year profit guidance.
Chief executive Steve Rowe said: ‘Against the backdrop of well-publicised difficult market conditions, our performance remained steady across the period.
‘Our food business traded successfully over Christmas as customers responded to improved value. Our transformation programme remains on track.’
The group said it did not take part in Black Friday discounts and held off from discounting ahead of Christmas, despite heavy promotional activity across the high street.
Mr Rowe said he did not regret the decision, which meant it went into the post-Christmas sales with around 25 per cent less stock – its smallest sale for five years.
He added that the group saw a late sales surge, due to the extra weekend before Christmas.
Like-for-like sales at Debenhams were down 3.4 per cent over the Christmas period
As with other food retailers, the group suffered pressure on sales from falling inflation, with M&S prices falling around 2 per cent in the quarter as it lowered prices to shift away from promotional discounts.
But Mr Rowe said he was encouraged by the ‘first steps’ to turn around the fortunes in its food halls. The figures come at a time of severe upheaval at the chain.
M&S recently drafted in former Sainsbury’s boss Justin King to join the board as a non-executive as the high street firm undergoes the next phase of a drastic transformation plan under Mr Rowe.
As part of the programme, spearheaded by Mr Rowe and chairman Archie Norman, M&S is seeking to save costs through store closures, shutting distribution centres, streamlining its corporate structure and ramping up digital operations.
Clive Black, an analyst at Shore Capital, said: ‘In markets widely characterised elsewhere as volatile, challenging, promotional and tough, the backdrop could have been better for sure for Marks & Spencer, which has delivered third quarter trade a little better than our recent expectations.
‘Quite what the next quarter brings for M&S and the wider UK retail and consumer economy, given a farcical political situation, remains to be seen.’
Meanwhile pub group Mitchells & Butlers said like-for-like sales rose 4.7 per cent over the 14 weeks to January 5 and jumped 12.3 per cent over the key two-week Christmas period. Shares in M&B lifted 5 per cent after its update.
Phil Urban, chief executive of M&B, said: ‘We are delighted with our performance over the festive trading season, with record trading on all key festive dates, including sales of over £12million on Christmas Day, and like-for-like sales growth of 12.3 per cent over the core two-week period.
‘The weather was milder than last year but the results were also due to the months of planning put in by our teams, and to several of our Ignite initiatives beginning to bear fruit.
‘We now enter our toughest quarter and, given the success of the festive trading period, we would expect trade to be quiet at least until people get paid again.
‘The ongoing uncertainty around Brexit will continue so we remain cautious about the outlook until the political and macroeconomic landscape becomes clearer. That said, we have made a good start to the year.’