If you were selling food, you did well, but if you were selling anything else, it was much tougher.
That appears to be the general theme emerging from the Christmas trading statements that the City has been digesting for the last couple of weeks and was reinforced on Thursday by three of the UK retail sector’s leviathans – Tesco, Marks & Spencer and the John Lewis Partnership.
Tesco has enjoyed its best Christmas since 2010, a detail packed with symbolism, as that was its last under Sir Terry Leahy, the chief executive who turned the company into the world’s second-largest retailer and whose departure heralded several years of turmoil.
Tesco’s UK like-for-like sales – the measure the City takes most seriously because it takes no account of store openings or refurbishments and is the best indicator of underlying sales performance – were up by 1.9% during the six weeks to January 6.
Within that, food sales were up by 3.4%, confirming the till roll data published earlier this week that suggested it had performed strongly.
Yet Tesco’s shares have been caned – the City had expected like-for-like sales growth of 3.2%.
Tesco’s strong showing in food confirms the suspicion that, if there can be said to be an entire sector that has done well over Christmas, it is the grocery sector.
That till toll data from Kantar Worldpanel suggests Britons spent £1bn more on food this Christmas than they did in 2016.
Clearly some of that will be down to inflation, with Sainsbury’s, for example, admitting that grocery sales volumes “went backwards slightly” during the Christmas period.
Yet the fact that it was still able to report a 1.1% rise in like-for-like sales, better than expected, points to its success in passing on higher food prices to its customers.
Sainsbury’s, which owns Argos and Habitat, also managed to grow sales in clothing though they shrank in general merchandise.
Another grocer that did well was Morrisons, which reported a 2.8% rise in like-for-like sales growth during the Christmas and New Year period, a performance that, like Sainsbury’s, beat City expectations.
Significantly, Morrisons pointed to the fact that its basket of 100 key Christmas items was unchanged in price from 2016, suggesting it has sacrificed margin in order to remain competitive.
This it certainly did, as it succeeded in growing like-for-like sales volumes, although the margin effect may help explain why, despite doing well over Christmas, Morrisons did not change its profit expectations for the current financial year.
It was striking that neither Tesco nor Sainsbury’s gave any mention of margin in their updates.
Elsewhere in the grocery sector, the “hard” discounters Aldi and Lidl both reported double digit sales increases, but, since neither publish their like-for-like sales figures, it is hard to say precisely how well they did.
A lot of the sales growth they will have reported for the Christmas period can probably be explained by the fact that both are trading from more stores than they were 12 months ago.
Christmas is traditionally less significant for the hard discounters because there is a lot of evidence that, at that time of year, a lot of food shoppers traditionally put more of their money through the tills of the established “big four” of Tesco, Sainsbury’s, Asda and Morrisons – while Marks & Spencer’s share of the grocery market typically doubles ahead of Christmas as consumers treat themselves.
And so to Marks & Spencer itself.
Like Tesco, shares of M&S received a shellacking on the trading update, falling by more than 5%, even though it has actually done marginally better than expected.
Clothing and home like-for-like sales were down by 2.8% during the 13 weeks to December 30, when the City had been expecting a drop of 3.4%, while food like-for-likes were down by 0.4% when the market had been expecting a drop of 1.1%.
What appears to have done for M&S is the unseasonably warm weather in October, which hit clothing sales, along with the company’s ongoing determination to wean itself off sales periods.
Steve Rowe, the chief executive, has talked a lot about protecting margins and that appears to have hit top-line sales to an extent.
Strikingly, though, M&S has not changed its guidance for profit forecasts for the current financial year, suggesting it has traded within its own expectations.
One of the undoubted Christmas winners appears to be the John Lewis Partnership (JLP).
During the six weeks to December 30, both its divisions traded strongly, with the John Lewis department stores enjoying a 3.1% rise in like-for-like sales and the Waitrose supermarkets up 1.5% – a showing that JLP said would have exceeded 2% had the crucial trading date of New Year’s Eve also been included.
John Lewis, famous for its “Never Knowingly Undersold” policy, looks to have outperformed the market but it has clearly been at the expense of its margin.
It was also notable that the one area in which John Lewis appears to have struggled is in Home, with Charlie Mayfield, the JLP chairman, suggesting consumers are wary of splashing out large sums.
Other winners to date on the fashion front include Superdry and Ted Baker, which have respectively reported like-for-like sales increases of 15% and 9% for the period including Christmas, although Ray Kelvin, the founder and chief executive of Ted Baker, insists that business conditions remain exceptionally tough.
Also apparently having done well are the smaller fashion retailers Joules and Fat Face, while Next, which kicked off the round of Christmas trading updates, has also done better than expected, having downplayed expectations beforehand.
It looks to have benefited from the cold snap in late November and early December.
Among other general retailers that appear to have done well over Christmas was Poundland, in spite of the woes engulfing Steinhoff, its South African parent.
Yet on the non-food side, there have been more losers than winners, with Debenhams among the casualties.
The company to have endured the worst punishment to its share price, though, is Mothercare.
Its shares fell by more than a quarter following its reverse – although some analysts cautioned that its difficulties could not be extrapolated to the wider high street for the festive period since it is more of a “year round” retailer and less dependent on the Christmas trading quarter for its overall full-year profits.
Interestingly, Mothercare’s woes appear to have been exacerbated by its refusal to cut prices, in sharp contrast with Debenhams, which did so both in the autumn and again in the post-Christmas sales period, when shoppers appear to have stayed away.
Moss Bros was another loser on the fashion front.
And House of Fraser, which reported a 2.9% drop in store sales – no like-for-like figure was provided – during the six weeks to December 23, also looks to have struggled.
Like M&S and Mothercare, it appears to have made protecting its margin a priority.
So that’s Christmas so far.
Shoppers appear to have been prepared to splash out more on food but at the expense of non-food items.
And those retailers that have done the best have done so by sacrificing their profit margins, which is perhaps understandable, given that for the last nine months of 2017 wages growth failed to keep up with inflation.
It looks likely to be the theme for the first half of 2018 as well.