Online Shoppers Make Retailers Have a Merry Christmas

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  • Attendance dropped by one-fifth as Christmas approached
  • Supply chain shortages meant fewer clearance items in year-end sales

As the worst fears about the damage that the highly infectious variant of the Omicron coronavirus could have on human health have subsided, concerns about its effects on businesses have also subsided.

Companies can currently cope with higher levels of staff absences, but the avoidance of further bottlenecks and the relaxation of self-isolation measures for fully vaccinated people have resulted in less disruption to the UK economy .

Although gross domestic product (GDP) may fall by around 1% for December and January, “this should be recovered in February and March if Omicron cases drop as fast as they have risen,” according to Capital Economics.

The best proof of this is the key Christmas trading season for retailers. Omicron, and the “Plan B” measures introduced by the government in an attempt to stem its spread, have meant fewer people have visited the stores, but spending appears to have held up.

“For most retailers this has been more positive than not compared to last year,” said Kien Tan, director of retail strategy at PwC. “Basically people have money to spend, they didn’t have a great Christmas last year, [so they] tried to make it special. ”

The first business updates from retailers seem to confirm this. Following (NXT) has said it will pay a special dividend of 160p per share after raising its full-year profit forecast following a strong Christmas.

Sales for the eight weeks through December 25 were 20% higher than the same period two years ago and £ 70million more than its previous forecast, the company said.

B&M European Value Retail (BME), meanwhile, had what General Manager Simon Arora described as “our best Christmas ever”.

The discount retailer reported group revenue growth at constant currencies of 0.1% for the third quarter, down from a record period last year when retail fleets were part of the handful locations that have remained open during lockdown periods. Compared to the same period in 2019, revenue increased 22.5%.

Arora attributed this to the early delivery of Christmas stock to avoid any disruption to the supply chain and it looks like people decided to buy early. Retail sales rose 1.4% month-on-month in November, with non-food sales increasing 2%, according to the Office for National Statistics.

Next said inventory levels were “noticeably lower” than expected as Christmas approached, which meant it was selling more at full price and there were fewer items to move once they were out. after Christmas sales started. Inventory for its end-of-season sale was 18% lower than two years ago, the company said.

The post-Christmas market period initially looked like an abyss. Boxing Day attendance was 43% lower than the previous Sunday, although the fact that it was a Sunday and several large retailers decided not to open were the main contributors to the drop.

Another is that Boxing Day sales are no longer the event they once were. The long-term trend is a decline in footfall because “we don’t need to do as much shopping on Boxing Day as 20-30 years ago, when the only way to get a good deal was to shop. stand in front of a store, ”Diane said. Wehrle, Director of Insights at Springboard. “Now we can do it on the Internet, even from Christmas Eve. “

Indeed, despite a drop in attendance in the week to Jan. 1 of 24.5% compared to 2019, according to Springboard, spending is expected to have increased. Barclaycard forecasts an average spend per buyer of £ 247 in post-Christmas sales, an increase of £ 61 from two years ago and a jump of £ 85 from last year.

“I expect a big change online this month,” Wehrle said.

Although consumers face increased national insurance contributions and dramatically higher energy bills, many believe that “the pressure is far enough away,” Tan said, especially since they don’t may not have spent as much on hospitality as Christmas or Christmas Day approaches. book vacations given the continuing uncertainty surrounding travel restrictions.

“All that money has been funneled into retail,” he said. “And you’ve seen capacity taken off the market in parts of the retail business. Last Christmas there were department stores and clothing retailers that were there doing sales before they closed for good. “

After the initial wave of store closings, with the collapse of Debenhams and Arcadia Group on either side of last Christmas, bankruptcies in the industry have been rare.

Debt is cheap and easily repairable, unemployment remains low and government support programs have largely done their job, said Will Wright, head of restructuring at Interpath Advisory – the former restructuring arm of KPMG, which has was acquired by private equity firm HIG Capital last year.

Although a moratorium on landlords taking action to collect rent arrears is set to expire in March, Wright does not expect another wave of defaults in the area.

The length of the moratorium has meant that most large retailers have settled rent arrears either through a formal process such as a voluntary company agreement or through consensual negotiation with landlords, he said.

“Bigger retailers have largely grabbed this nettle and for those who haven’t, there are plenty of opportunities to do so through consensual negotiations. I think the owners recognized that they had no choice but to concede and make reasonable deals, ”he said.


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