Retail has always been a highly dynamic industry, intensely competitive and fighting for a share of the wider consumer spending pot. This is an industry used to dealing with a constant diet of change. However, the change we are seeing today is far more profound than anything the past has thrown up. We are now seeing by far the most challenging period in retail history. A reshaping of the industry’s structure and economics is unfolding, and most of the real change is yet to happen.

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Monthly Archives: January 2019

Christmas – how was it for you?

Three trading weeks into January and most of the Trading Statements are out. It comes as no surprise that we still don’t have a clear view of what happened. The BRC called it the worst Christmas trade seen in 10 years and intuitively, I think this is right. The ONS data today is full of flaws. For example, it says that small retail businesses had a bumper Christmas but large ones struggled. Rather more believably, further analysis of the data shows that while online retail across all non-foods grew 15% YoY, physical retail went backwards by 1.5%.

Looking at the Statements, trading appears to have been rather better than feared. Indeed, it looks a bit better than the headline data from the BRC and ONS. However, I would warn against taking the Statements at face value. Every company uses different criteria, so they cannot be read across from one business to another. Indeed, they cannot always be read YoY for one company.  They are not audited and the numbers, definitions and timeframes can be changed.

A growing variable is returns. As online gets bigger, so returns become a bigger proportion of sales. Given gifting, returns will be even higher than usual. December’s total non-food sales were 29% online against 26% the year before. Virtually no Trading Statement mentions returns. The timing of most Statement meant that the vast bulk of returns would not yet have come through. In other words, effectively retailers reported “gross” sales.

If we want Christmas Trading Statement to be a more reliable barometer of retail performance, they need to be independently audited and regulated with agreed transparent ground rules. Until this happens, large grains of salt are strongly recommended.

One final point about Q1 2019 and judging retail performance. The “Beast From The East” had a massive impact on trading performance last year. The comps are therefore very soft and need to be taken into account. However, in cash terms this will be irrelevant and I suspect many retailers have entered the New Year in a materially weaker cash position YoY.

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Next in line

In world of uncertainty, consistency is a haven. And a reliable feature of the retail calendar is Next’s Christmas Trading Statement being greeted as if it represents the industry as a whole. It doesn’t.

This morning’s numbers were solid and respectable. They will look much better as the next few weeks unfold, with the rest of the trading statements demonstrating yet again that Next is atypical. More than half its sales are now online. It only goes on sale seasonally, to clear stock and has avoided the massive damage caused by frequent discounting across the market. The company is better managed than its peers, with tight, consistent leadership. While it might be thought unexciting and a little bland, Next is risk averse and reliable. Over the years, these characteristics have helped to set the company apart.

Overall, the numbers show a continuation of its recent trend where the physical/online split is moving very steadily in favour of the latter. Next’s statement covers the 9 weeks to end December. Online sales were +15.2% and stores down 9.2%. The annualised numbers show this trend accelerated over the period. The company has also lowered its profit guidance for next year, albeit by a modest 0.6%.

Next remains a strong business and these figures reflect this. It has retained brand and price integrity where many of its peers have allowed theirs’ to dilute. This will certainly have helped it trade better than most through this period. The shake out I expect to see unfolding will make room for the better players. Next can more than hold its own and will be a beneficiary.

 ** We support retailers and stakeholders with strategic advice. If you think we can help, drop me a line –

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