Nimble Retailers Stay in the Game; Analysis after a Month of Largely Grim Financial Reports from UK Retailers, Chris Knox Takes a Look at How the Big Names on Northumberland Street in Newcastle Have Fared So Far and Asks Experts to Assess the Winners and Losers

The Journal (Newcastle, England), January 28, 2009 | Go to article overview

Nimble Retailers Stay in the Game; Analysis after a Month of Largely Grim Financial Reports from UK Retailers, Chris Knox Takes a Look at How the Big Names on Northumberland Street in Newcastle Have Fared So Far and Asks Experts to Assess the Winners and Losers


Byline: Chris Knox

RETAILERS had little to celebrate over Christmas as the credit crunch discouraged much festive extravagance. Many store chains reported the worst Yuletide in 14 years, although a number of recent surveys shows spending slowdown was not as steep as many feared.

But Newcastle's main shopping street was typical of many across the country in seeing a 19% slide in footfall in December compared with 2007.

Looking ahead to the rest of the year, it is clear 2009 is going to be a white-knuckle ride for much of the retail sector.

Director of consumer analyst Mintel Richard Perks gives his view of the market.

"It was a bad Christmas, but it could have been much worse. Consumers were cautious, but they had been for much of 2008 and had begun to save again," he said.

"We have even seen a net repayment of mortgages for the first time since the last recession. That meant that by Christmas, consumers had some spare cash and that helped to finance a late rush at sales time.

"However, retailers were expecting tough times and that led them to discount more than usual and all those promotions will have hit profits.

"The food retailers were the main winners because people were determined to have a good time, while some high fashion retailers have also been less affected, as the young were not affected by the income squeeze of 2008.

"The middle mass market has suffered worst, as is clear from the M&S and Next results. There was trading down in this market and that benefited clothing retailer Peacocks and grocers like Asda and Tesco.

"The period has seen an unprecedented number of retail failures. Some, like Woolworths and MFI, have gone for ever. Others, like Whittard and Officers Club, have come straight out of administration, shorn of their problem stores, and will continue to trade. In the case of Zavvi, which lost over pounds 40m at the trading level last year, it is remarkable that the company lasted as long as it did.

"Zavvi failed partly because it had not adapted to the growth of the internet, with so much of the music market moving to downloads.

"Christmas 2008 was not as bad as it might have been. 2009 will be much worse, as unemployment continues to rise.

"Hopefully there will be some recovery in 2010, but it is far too early to forecast that with any confidence.

John Lewis

The department store chain was one of the biggest winners of December's early sales after increasing its like-for-like figures by 27.4% to pounds 78.61m in the week to January 3. The business was helped by heavy discounting, which led to record takings for the week. However, this was a response to prior tough conditions for the firm's department stores, with sales dropping by 3.2% in the 23 weeks to January 3.

Its upmarket supermarket chain Waitrose also performed strongly in the week, with the healthy sales of party food and Champagne before New Year's Eve helping to increase like-for-like trading by 7% to pounds 81.23m.

Divisional director at Brewin Dolphin Investment Management in Newcastle, Gary Fawcett, said: "A good overall performance which suggests the company has benefited at the expense of its rivals. John Lewis's clearance has been successful and leaves the company with little excess stock, meaning that it should hit the new year running."

Superdrug

The UK's second-biggest health and beauty retailer, Superdrug enjoyed a successful run up to Christmas with its biggest ever sale helping to increase trading 3% in the five weeks to January 3, compared with the same period in 2007.

Mr Fawcett said: "We would regard Superdrug as a value-for-money retailer which has benefited from the downturn by attracting customers through the doors at the expense of its rivals that may be deemed to be more expensive. It is likely that this will continue to work in its favour over the coming year. …

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