Forecasting Eye
Following disappointing pre-Christmas sales results, Cebr expects retailers to discount to an unprecedented extent in January boosting Q1 sales. The most recent ONS sales figures report that retail sales for the three months up to November (not including Black Friday) increased by 2.6% year-on-year. Cebr estimates that retail sales for Q4 will have grown by 3% compared to the same quarter in 2018. The British Retail Consortium reports that total retail spending in November and December fell by 0.9% compared to last year and like-for-like sales during this period decreased by 1.2% year-on-year.
The decisive general election outcome helped to boost consumer confidence as the YouGov/Cebr Consumer Confidence Index increased to 105.4 in December, up by 0.3 points from November. However, of course this would not have had an impact until mid-way through December.
Nielsen reported that UK supermarket sales only grew by 0.5% in the last four weeks up to Dec 28th year-on-year, the slowest growth over the Christmas period in five years. The supermarkets that performed well during the Christmas period include Aldi and Lidl both reporting growth over 5%. The online supermarket Ocado experienced the fastest growth over the Christmas period reporting a sales boost of 12.5% . In contrast, Sainbury’s, John Lewis and M&S all reported declining like-for-like sales over the Christmas period.
Looking into the spending habits of consumers during the Christmas period, it is interesting to note that sales of Christmas puddings and biscuits were down 16% and 8% on last year, respectively, and sale of sparkling wine fell by 8% over the same time period. Similarly, M&S reported that they had overstocked on mince pies. Further evidence of customer preferences shifting towards more healthy food alternatives is Tesco reporting that they had a very enthusiastic response to their expanded range of plant-based festive food. In addition, Waitrose announced that sales of their vegan festive range was up by 40% this year and “free from products” and dairy alternatives saw a rapid rise in sales, up by 12% and 41%, respectively.
Events taking place earlier in Q4 also had an impact on Christmas sales. Cebr found evidence that the Black Friday discount shopping event has pushed consumers to complete parts of their Christmas shopping early or they wait to the very last minute rather than spending money in the beginning or middle of December. This was reflected in John Lewis’ attributing poor sales performance during Christmas on increased competition and Black Friday promotions moving consumption spending to the end of November. Once considered one of the biggest events of the year, Boxing Day sales are no longer attracting the same crowds in store as retailers are pushing their discount sales earlier and earlier each year. Many retailers have moved their post-Christmas sales to before Christmas, starting even up to a week before the 25th. As retailers are left with high levels of inventory, this will drive up January discounts and Cebr forecasts that retail sales for Q1 2020 will increase by 3.7% compared to the same quarter last year.
The latest release by YouGov/Cebr on household’s perception of their financial situation increased by 4 points in December indicating that households are more positive about their finances in the coming year. Record high retail discounts and increased financial opinion among consumers will help to boost spending over the next quarter. Whether this will have a material impact on retailers’ performance will depend on retail stores being able to maintain their profit margins despite high discounts.
Contact: Charlotte Cervin ccervin@cebr.com phone: 020 7324 2879