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Little cheer for Britain’s high street as shoppers stay home

YEAR end is usually a good time for Britain’s high street retailers, with shoppers stocking up on food and gifts in the run up to the holiday and then hunting for bargains in the January sales.
So when the news broke Wednesday night that December sales at Marks and Spencers had slumped 1.8 percent, shareholders were quick to punish the British retail giant, slashing some £ 300 million from its share price in just a few hours. Prices rebounded by the time the markets closed on Friday, but the point had been made.
The early release of the M&S figures came just a day after camera retailer Jessops became the latest British brand to go into administration, following a string of failures that took in Comet, Game and JJB Sports in previous months. That 2012 had been a bad year for British retail appears to be a significant understatement.
The British Retail Consortium revealed on Wednesday that UK retail sale values were up just 0.3% compared to December 2011, when they were up 2.2 percent on the same period in 2010. The discrepancy reveals that even less shoppers are spending money on the high street at the beginning of 2013 than they were in 2012.
“Against the relentlessly tough economic backdrop and low expectations, these results are not a cause for celebration, but not a disaster either,” said Helen Dickinson, director general of the British Retail Consortium. “Retailers knew they were facing a challenging Christmas. Some did better than others but they were generally well prepared for shoppers’ limited spending power.”
It wasn’t just December either. High street sales dropped 0.8 percent from September to October, with many retailers hoping that sales would improve in November as consumers stocked up in the run up to Christmas. The opposite turned out to be the case, with sales dropping a further 0.4 percent, according to statistics published by Real Business Rescue, a consultancy firm in London.
“A flat end to a flat year is perhaps the best way to describe the Christmas trading for 2012,” said David McCorquodale, head of retail at KPMG, adding that retailers seemed ready for the shock this year and so held less stock. “The standoff between retailers and consumers looking for bargains and discounts continued throughout December and, while some retailers will report record festival sales, most will breathe a sigh of relief because it could have been much worse.”
And things will not necessarily get better in 2013. Late on Friday, the National Institute of Economic and Social Research estimated that British gross domestic product (GDP) fell 0.3 percent in the fourth quarter after rising 0.1 percent in the three months through November. While the British economy emerged from recession in the third quarter of 2012, manufacturing has fallen and industrial production also failed to rise as expected.
“January will be a tough month for retailers as consumers face up to their credit card bills after Christmas and it is likely 2013 will bring more of the same challenges,” McCorquodale added. “While consumer confidence remains low, shoppers will tighten their belts and rein in their spending, making life difficult for the average UK retailer. There will be no boom and it’s likely more than a few will go bust.”
It will come as some comfort for the high street that online sales were up 17.8% last month, the fastest growth since December 2011, when they rose 18.5%. BRC’s Dickinson said that while online still accounts for a small part of total sales, its ease and convenience was increasingly attracting shoppers.
“The surging popularity of tablets and smartphones giving even better access is a major factor. Shoppers took advantage of the investment many retailers have made in making their websites easier to use across multiple devices, in flexibility of delivery options as click-and-collect came of age and in security — they now feel much more comfortable putting their credit card numbers into their mobile phones,” she said.
A rare — and limited – success story was supermarkets over the Christmas period. Tesco revealed Thursday that sales grew 1.8 percent in December, with chief executive Philip Clarke pointing to the increasing popularity of the company’s online stores.
“I am pleased with our performance over the important Christmas and New Year period in the UK, (but) whilst our seasonal performance is encouraging, there is a lot more to do,” he said, pointing out that the supermarket chain is only six months into the implementation of its nine-month plan.
Joanne Denney-Finch, chief executive of IGD, said that food retailers were right to be apprehensive.
“The focus on eating … over the festive period helped retain the week leading up to Christmas as the biggest of the year … but taken as a whole, December’s performance was relatively flat,” she said.
“Yet again shoppers left it even later than the previous year to do their grocery shopping, with a strong final two weeks off-setting a slow start to the month.
The challenging conditions look set to continue into this year.”