UK retailers’ Christmas sales were hit by brutal price pressure and the shift to e-commerce, rounding out their worst year on record.
Marks & Spencer, Tesco, and John Lewis Partnership provided further evidence of the tough climate facing the UK’s department stores and supermarkets with generally downbeat Christmas sales updates.
The latest reports confirm fears that UK retailers would suffer as discounters, the rise of online shopping, and political turmoil took their toll.
The British Retail Consortium, a trade group, said the 0.1% drop in the industry’s revenue in 2019 was the worst performance it has recorded.
It compared with a 1.2% increase in 2018, while sales at stores operating for at least a year declined 0.5%, the business group said.
M&S shares fell as much as 11% after it said gross margins will be around the lower end of its guidance for the year after Christmas holiday sales at the long-struggling clothing and home unit were weaker than the consensus.
The shares closed 9% lower on the day.
Tesco’s revenue dropped on a comparable basis as a weaker performance in central Europe masked growth in the UK that came ahead of expectations.
John Lewis warned that it might not pay a bonus to its employee-owners after a drop in revenue.
And Paula Nickolds, the managing director of its department store division, is leaving.
Marks & Spencer stock has lost more than half its value after dropping in each of the past five years. Menswear and lower gift sales held back the company’s clothing unit.
M&S has been trying to turn around its business for the past decade, and its latest efforts are being led by chairman Archie Norman and chief executive Steve Rowe.
Mr Rowe said the weakness in Christmas sales was largely due to one-time issues such as the menswear performance and waste in the food unit.
“The changes we made earlier in the year in clothing have arrested the worst of the issues of the first six months and we are progressively building a much stronger team for the future,” he said in a statement.
Food performed better at Marks & Spencer, helped by investments in the product range and price cuts.
Morrison Supermarkets and Sainsbury gave trading updates earlier this week. While Morrison acknowledged that its lacklustre sales were partly its own fault — it failed to take part in Black Friday sales this year — Sainsbury’s performance was fairly robust.
Next, the first UK retailer to update the market last week, also beat market expectations.
The departure of Mr Nickolds at John Lewis follows that retailer’s decision announced in June to name UK former telecom regulator Sharon White as its next chairman. The company’s department-store operations have been hit especially hard by the growth of Amazon and other online retailers.
“Paula and I have discussed where we are and we have agreed this is the right time for her to move on and we have reached that decision together,” departing chairman Charlie Mayfield said
Profit for the year will be “substantially lower”, Mr Mayfield said. Scrapping the vaunted staff bonus would be an important symbolic blow after the company had clung to small payouts in recent years even as earnings weakened.
Tesco shares rose as much as 2.1% and closed around 1% higher in the session.
Bruno Monteyne, an analyst at Sanford C Bernstein, called the chain’s UK results a “material outperformance” compared to rivals.
Still, the company only eked out 0.1% growth in Britain over Christmas.
“In a subdued UK market, we performed well, delivering our fifth consecutive Christmas of growth,” said Tesco chief Dave Lewis, who will be leaving the grocer this year.