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Tomorrow, Next will kick off the trading statement reporting season and over the coming weeks, history will be repeated. A stream of often upbeat  statements will gradually emerge, and they will be mostly misinterpreted. These statements at headline level are about as indicative of where we really are as the Premier League table is after two games at the start of the season.

Christmas trading statements are unaudited and produced internally. I’m not suggesting that they are simply made up – God forbid!! However, there is latitude to adopt a flexible approach with definitions and timeframes. And there is massive pressure to deliver what a company’s stakeholders want to see. Goalposts are regularly picked up and plonked down in a different spot. Definitions and timeframes can be adjusted to suit. And of course every company uses totally different criteria. Beyond this, the obsession with year-on-year comparisons has encouraged most people to look at the headline percentage figures, and ignore the absolute numbers on which they are based.

It is already clear that Christmas trading was poor because the wider economy is weak. Wages are flat and inflation is squeezing spending. Economic weakness coupled with political uncertainty are bound to encourage consumer caution.

Retail is entering the New Year on the back foot. Against the background of very thin consumer confidence, last year saw 64% of non-food retail on sale over the 12 months. This literally and emotionally devalues the attractiveness of product offers. Given that over 50% of UK retail sales is about wants rather needs, it is easy to see why the industry is so vulnerable.

Bear all this in mind when you read these Trading Statements. Don’t be fooled by the packaging and focus on the underlying contents!

** We advise retailers on strategy and analytics. We also track promotional activity across the UK’s key retailers. Get in touch for details admin@richardtalksretail.co.uk

Happy New Year to everyone!! Here are some words and phrases we will be hearing much more of in retailing during 2018:

• Losers
• Profits warning
• CVA
• Administration
• Retail casualties
• Onerous leases
• Staff cuts
• Consolidation
• M&A
• Restructuring
• Promotions
• Debt
• Credit insurance
• Cost reduction

Here are some words and phrases I think we need to hear much more of:

• Winners
• Revenue growth
• Profit growth
• Market share growth
• Customers
• Staff
• Investing in service
• Range editing
• Space editing
• Brand integrity
• Price integrity
• Bank support

Role models are invaluable. There are plenty of retail winners out there and lessons can be learned from many, by many. No one is going to be a winner in this market because they are good at managing costs. That has to be a given. Being great at selling is the non-negotiable skill in this market. And being good at selling has to begin and end with the customer: this last word is the most important in the two lists above. Investing in truly understanding your core customer is critical. And having enough belief in your brand and its relationship with those core customers to not chase after peripheral business. This is what I believe is essential for retail success next year.

** We advise retailers and the financial community, and track promotions by sector and company – for details contact admin@richardtalksretail.co.uk

• With a few days left of pre-Christmas trading, 70% of on-food retailers are currently on sale
• This is virtually the same as last year – the major difference being this year’s far greater cost pressures which very few are managing to pass on to their customers

• Fashion is the major driver of this week’s index hike. Last week 56% of fashion was on sale. This week it’s 74%
• Th premium sector across non-foods has jumped on the bandwagon – last week’s 38% have hit 50% this week

• Post Christmas we will see in the index move through the 80s and into the January Sales
• With 64% of retailers on sale throughout 2017, the impact of the traditional “January Sale” has been materially diluted

** We advise retailers and the financial community, and track promotions by sector and company – for details contact admin@richardtalksretail.co.uk

My impression is that Christmas trading is as cold as the weather. Over many years I have learned that trading over the months leading up to December are a strong guide, and this year has been weak.

My sense is that footfall has been relatively weak. And that footfall is never shared equally, or even proportionately. Visiting stores today. John Lewis is reasonably busy. If its footfall is 100, M&S stands at around 75. I estimate Debenhams at c35 and House of Fraser at c20. I spend lots of time walking stores throughout the year and in a variety of locations. I would say these relationships are not too different from the rest of the year, except M&S’s footfall is materially higher now – a slightly better Christmas might be on the cards for them.

Meanwhile, today we learn that inflation is up to 3.1%. This tells us something about what the retail results season might look like as 2018 unfolds, and it wont be good. Over this period the pound has devalued by c15%. The fact that retail has only managed to increase prices by some 20% of this figure underlines just how pressured the industry is right now. Some of the cost will have been shoved back up the supply chain to suppliers but this has product quality implications. How many retailers can risk reducing the quality of what they sell?

We have already seen signs of industry stress in recent weeks with some administrations, some credit insurance worries and stories about cash flow concerns. However weak Christmas trading is, this will still be the cash flow peak for most retailers. These stress levels can only increase in Q1 2018.

** We advise retailers on strategy and analytics. We also track promotional activity across the UK’s key retailers. Get in touch for details admin@richardtalksretail.co.uk

This morning’s news of the takeover of Intu by Hammerson is very positive. I have been warning of the inevitable consequences of relentless capacity expansion for well over 10 years and found the real estate side of the retail industry the slowest to understand. This deal involves two companies that get it and have the vision and courage to act.

Today, 23% of non-food sales already goes through online, a channel that has grown from zero in more less 15 years. In the bricks and mortar world, trading space has continued to expand, albeit at a progressively slowing rate. However, online has failed to materially make the spending cake bigger. With consumer spend in retail more or less flat, something has to give. The industry is seriously over-supplied, and getting more so by the month. The vast majority of retailers have too many stores and one way or another, this has to change.

I think this deal recognises reality and its implications. The enlarged company will be better able to take some tough decisions on editing capacity. It will also be better placed to deal with the implications of retailer distress that will characterise next year’s market. I expect to see more casualties, administrations and CVAs. The enlarged business will be much better placed to play a pro-active role in this reconfiguration of industry capacity.

** We advise retailers on strategy and analytics. We also track promotional activity across the UK’s key retailers. Get in touch for details admin@richardtalksretail.co.uk