This week's retail news 'you may have missed'.......
At mdj2, we’re passionate about retail and always looking to share our news, views and insights. With so much information out there, we wanted to share just a small selection of retail news headlines from last week that we found interesting….??
6 big Christmas trading trends from M&S, Tesco, Sainsbury’s and Asos
With January now in full swing, retail giants such as Tesco, Sainsbury’s M&S and Next have unveiled their trading results for the crucial Christmas period.
Despite?inflation?soaring and concerns about waning consumer demand, shoppers splashed out over the festive period.
M&S CEO Stuart Machin says: “Customers wanted to celebrate the best they could over the Christmas period.”
There were positive performance across the sector with a slew of profit upgrades as total sales across retail jumped 6.9% in December year on year, according to the?BRC.
The winners and losers
There were a raft of profit upgrades from the likes of Next, Sainsbury’s, B&M, JD Sports and Card Factory following a better-than-expected Christmas for retail.
Next posted better-than-expected sales, up 4.8% over the golden quarter, and now expects a full-year pre-tax profit of ￡860 million, up from a previous forecast of ￡840 million.
Retail giant M&S also celebrated a 9.9% sales jump, with food like-for-likes up 6.3% and clothes up 8.6%. The retailer notched up record market share in food ever, and its highest share in clothing and home in seven years, with positive numbers across all categories.
In grocery, the discounters were the big winners with Aldi sales soaring 26% and Lidl’s surging 24.5%. However, the traditional retailers fared well with Tesco and Sainsbury’s posting strong sales growth.
The big losers this year came from the world of online with big pureplays including Asos, N Brown, Very Group and Virgin Wines all posted falling sales.
Asos,?which posted an 8% drop in UK sales?in the four months to 31 December, expects to make a loss for the year and new CEO José Antonio Ramos Calamonte is taking strong action to turn the retailer around.
He plans to cut office space and close down warehouse storage as he aims to save ￡300m through cost mitigation measures.
Meanwhile, Virgin Wines warned on profits after its sales plunged 16.8% over the golden quarter.
The online wine specialist was hit by both internal and external factors.
Issues with its new warehouse management system created a backlog of orders whilst postal strikes and bad weather in the lead up to Christmas forced it to bring forward delivery cut-off times by a week, which it said cost it ￡1.5m of sales.
The big Christmas trends
Shoppers wanted to celebrate
Despite the backdrop of the cost-of-living crisis, shoppers wanted to celebrate this Christmas.
Tesco boss Ken Murphy says that the fact that for many it was the first Christmas without Covid restrictions for three years meant that shoppers wanted to make sure it was a good one.
“We were pretty confident it would be decent Christmas as it’s the first pandemic-free Christmas for some people for a few years and a chance to escape the daily challenges of the cost of living,” he says.
Sainsbury’s noted that shoppers “went all-out” when it came to their Christmas dinner and it had a record year on champagne and fizz.
Majestic,?which posted the second best Christmas performance in its 42-year history,?also saw sparkling wine and champagne sales soar as office Christmas parties and family get-togethers returned over the festive period.
The return of the Christmas party also helped drive fashion sales. M&S’s partywear more than doubled year on year and?formalwear jumped 40%.
Despite the cost-of-living crisis, retailers are expecting this desire to celebrate to continue into the new year.
Machin says that?M&S is backing big events like Valentine’s Day and Mother’s Day?to help drive sales momentum.
He says shoppers have told them there is “still lots they’re planning for” over the course of the year, with the focus being on big events.
From Valentine’s Day to Mother’s Day and Easter, Machin says “there is opportunity across home but also food to maximise those events” to maintain its sales trajectory.
Price rises drive sales growth
Christmas may have looked merry for retail with many businesses notching up strong sales growth, much – if not all of this growth – is due to inflationary price rises?pushing up the value of goods being sold.
Both Tesco and Sainsbury’s revealed that sales volumes had dropped year on year.
BRC chief executive Helen Dickinson said: “Despite the stronger sales, growth remained below inflation, making December the ninth consecutive month of falling volumes.”
Shoppers returned to stores as online sales fell
Shoppers returned to stores in their droves over Christmas in a continuation of a trend seen across the year.
However, the delivery disruption the Royal Mail strike caused across December exacerbated this trend.
At Next, store sales jumped 12.5% compared to just 0.2% growth online while Sainsbury’s online sales fell more than 10% over Christmas, despite a 7.1% sales rise.
At Argos, “walk-in” visits in the week before Christmas jumped 50% as Sainsbury’s CEO Simon Roberts said customers wanted certainty they would get their Christmas presents amid?delivery delays.
The importance of a strong omnichannel offer was critical with click-and-collect sales soaring.
M&S said click-and-collect jumped 20% year on year while at Argos the collection method jumped?from 40% to 50% of sales over the period.
Online players were hit over Christmas, with ecommerce sales down?12% in December, according to IMRG, with no major category achieving year on year growth.
In light of the Royal Mail strikes and knock-on effect it had on the delivery network, Asos was one of many retailers that was forced to move delivery cut-off dates for Christmas and New Year earlier, which hit sales.
Toys, beauty and tech top performers
The traditional gifting categories of beauty, toys and electricals had a strong Christmas.
Boots retail sales?jumped 15% in December while?The Fragrance Shop?sales rocketed 11.2%.
The Perfume Shop?sales also reached a record high over the golden quarter as 1.8 million product items were sold between 28 November and 24 December.
Very said its toy sales were up an impressive 26% year on year, while beauty and fragrance jumped 12.7%.
At Argos, sales over Christmas jumped 7.1% with technology products particularly strong. Specialist?Marks Electricals?also saw sales soar 33.4%.
Electricals demand was boosted by promotions around the World Cup, a big period for TV sales, and strong demand for energy-saving items such as air-fryers and heated laundry airers.
Value is top of mind
Shoppers may have spent but they were still looking for value this Christmas.
Sainsbury’s boss Roberts says: “Customers looking for strong value and are looking harder than ever before”.
In this environment, discounters and value players such as Aldi, Lidl, B&M and Poundland all thrived as some shoppers shifted toward shopping with specialists.
However, a strong value offer was critical across the high street.
M&S boss Machin says its work on upping its value credentials had helped woo shoppers over Christmas.
“There’s no doubt that our entry price products did resonate with customers who were seeking out value,” he says.
In food, M&S’ Remarksable Value range was up 27% on last year and featured in 20% of customer baskets, which Machin said showed that its customers wanted “competitive prices whilst not compromising on M&S quality”.
There was also a big drive towards own-brand products, particuarly in grocery with both Tesco and Sainsbury’s noting an uplift of their own-label products.
Shoppers still looking for a treats
Consumers may be seeking out value but they are also looking to make their budgets stretch to treats for themselves and loved ones.
Both Tesco and Sainsbury’s flagged that as well as their value offer, premium lines also experienced strong growth over Christmas.
Sainsbury’s premium Taste the Difference sales jumped 10% year on year, and 27% against pre-pandemic levels.
“Shoppers were trading into private label so can use some budget to treat themselves,” explains Roberts.
Online retail sales suffers record decline in December
UK online retail sales fell by a record 10.5% in 2022, as December online sales also slipped by 12%.
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It is the first year of full-year decline recorded by the?IMRG?Online Retail Index, which tracks the online sales of 200 retailers, following a previous low of 2.7% growth in 2021, compared to 2020.
The only categories that saw growth in December were lingerie, which rose 0.9% year-on-year, haircare, up 9.1%, and makeup, which increased by 8.3%.
Although the growth was not enough to push growth for their parent categories, as clothing was down 6.1% year-on-year in December, while health and beauty dipped 11.8%.
Clothing was the single main category to achieve positive growth for 2022 as a whole, at 2.5% year-on-year, with electricals down 18.1% and home and garden falling 17.6%.
Growth online for the?Black Friday?week turned out to be flat, but it was better than expected and out of sync with the low demand of the previous 10 months.
Business was also slow in the week of December 18 with sales down 4.7% following delivery disruptions that led retailers to bring forward their final Christmas order dates.
That week’s decline came one year on from a 22.4% decline for the same period last year.
IMRG?strategy and insight director Andy Mulcahy said: “Retail is a confidence game; if people feel they are comfortable with their financial and have some disposable income to play with every month, then retailers tend to see that reflected in general patterns of demand.
“It really has been a poor year. The bright spot, however, is that traffic to retail sites has continued to grow even after the huge surges from the pandemic, so once the general economic malaise eases, retailers should be in a good place to benefit from the fact that people still like browsing and shopping for products.
“The issue is that many are expecting another tough year in 2023, with the first half, in particular, unlikely to provide much respite.”Rising?inflation?meant that the average basket value increased from ￡121 in 2021 to ￡134 in 2022, making products more expensive for people to buy.
Shoppers on a budget go back to cash
Cash use has increased for the first time in more than a decade as households use physical money to help with budgeting.
The amount of cash withdrawals shot up by nearly 20 per cent last year, according to Nationwide, with more people choosing cash over cards because they find it easier to keep on top of how much they are spending.
The building society reported that 30.2 million withdrawals were made from its cash machines last year, up from 25.5 million a year earlier. Customers withdrew an average of ￡105 per visit — a 2 per cent decline on the previous year — but this was still 25 per cent more than pre-pandemic levels. Inflation has been running at more than 10 per cent since?July last year.
Otto Benz, of Nationwide, said: “For the first time in years we are seeing a natural rise in cash withdrawals as people return to using cash to help avoid getting into debt.
“Far from the end for cash, it shows that the future of money management is constantly evolving.”
The use of cash steadily declined since 2009 after the introduction of contactless payments, which now account for more than a quarter of all transactions.
Cash use plummeted particularly sharply at the start of the pandemic when people were concerned that they might get infected with Covid by handling money.
Sarah Coles, personal finance analyst at Hargreaves Lansdown, said: “Sometimes it’s easier to manage your money if you can physically see how much cash you have left. But you need to think carefully about the security of your money. The idea of withdrawing your weekly or monthly pay and leaving it in envelopes around the house raises worries about theft.
“There’s been a boom in social media posts promoting ‘cash stuffing’, where you mark envelopes with different kinds of spending — like food shopping or going out — and stuff each one with the cash you want to spend on it that week.”
Separately, data showed that the use of “buy now, pay later” schemes hit an all-time high at Christmas. The latest barometer from Equifax reported that a third of British adults have used one of the schemes, which allow online shoppers to defer payments, usually interest free. The credit agency’s data suggests that 4.1 million people used “buy now, pay later” for the first time in 2022 — with 13 per cent of consumers having used it to pay for a meal or takeaway and a similar proportion for groceries or toiletries.
Jayadeep Nair, of Equifax UK, said: “There’s little in our research to suggest that buy now, pay later does more harm than good but with more than four million people using it for the first time this year, it’s important that new users are aware of the risks of mismanaging their repayments.”
Wickes ties up with BNPL giant Klarna
Home improvement retailer Wickes has announced a tie up with?buy now, pay later giant, Klarna in a sector first.
The partnership will now provide customers with more payment options when shopping online for home delivery or collection in store.
Customers are able to use the payment solution either through the Wickes app or website. From there, they will be able to choose to either pay in 30 days or pay in three interest free instalments.
Klarna will be available when purchasing a variety of DIY items online, including, timber, tools, paint and more and will feature the Klarna logo on the site.
Aldi axes online deliveries to focus on new stores
Shoppers will no longer be able to order Special buys or cheaper wine to their door as Aldi cuts its online operations to focus on opening new stores.
Delivery of wines and spirits is to end later this month and Special buys will no longer be available online by autumn, according to?The Sun, who first reported the move.
The discount retailer is winding down its online operations and stopping deliveries from its website.
Aldi launched home delivery of wines and spirits in 2015 which grew to offer shoppers many non-food Special buys exclusively online.
It will leave click & collect of groceries, which Aldi launched in 2020 and is available from over 200 stores, as its only online service.
Shoppers have often been caught in queues online to snap up the latest Special buys, including air fryers, heated clothes airers, and popular Kevin the Carrot toys.
“We keep our prices low by being the most efficient retailer in Britain and we have therefore taken the decision to stop selling wine and spirits online for home delivery from later this month,” said an Aldi spokesman.
“We will also stop selling our Special buys online for home delivery later this year.
“We are working with our colleagues to understand the impact of this change for our people.
“This will involve exploring different options for our colleagues across Aldi.”
It isn't clear if there will be any job losses as a result of online ordering coming to an end.
The discount retailer wants focus on its target of 1,000 shops across the country. It currently has 950 branches.
Marks & Spencer unveils plans for 20 new “bigger, better” stores
Marks & Spencer?plans to ramp up its store overhaul with 20 new shops across the UK in a move that will create more than 3,400 jobs.
Over the next financial year, the business plans to open eight full-line stores in shopping centres such as the?Bullring?in Birmingham and the?Trafford Centre?in Manchester, as well in as retail parks and high streets across key cities.
It also will open 12 new food halls, including in Stockport, Barnsley and the seaside town of Largs in North Ayrshire, Scotland. The new openings will bring investment in new stores to ￡480 million, M&S said.
The new Marks & Spencer store plans come under a wider restructure of its retail footprint, with the group last year revealing it would reduce the number of its full-line stores by 67 to 180 by early 2026.
Chief Executive Stuart Machin said stores were a “key part” of the group’s future, alongside online trading.
He said: “Stores are a core part of M&S’s omni-channel future and serve as a competitive advantage for how customers want to shop today. Our store rotation programme is about making sure we have the right stores, in the right place, with the right space and we’re aiming to rotate from the 247 stores we have today to 180 higher quality, higher productivity full line stores that sell our full Clothing, Home and Food offer whilst also opening over 100 bigger, better food sites.
"The out performance of our recently relocated and renewed stores, give us the confidence to go faster in our plan. Our investment in stores not only delivers a better experience for customers and colleagues, it boosts local communities with new job creation and will help us deliver a more sustainable estate in every sense."
Details of the accelerated store openings show that five of the group’s new full-line stores will be based in former Debenhams sites as part of its pledge to regenerate vacant store outlets.
The group is committing to retail space at a time when many rivals are retrenching from the high street and switching to online only. But M&S wants to open “bigger, better stores”.
It said each of the larger new stores had been designed “with local families in mind”, with wider aisles and more spacious clothing and home departments, allowing shoppers to browse .They will also have new M&S cafes, as well as sustainable initiatives such as Fill Your Own, and offer free car parking.
The announcement comes after?M&S recently emerged as one of the winners of the Christmas trading season, with a 8.6% rise in clothing and home comparable store sales?in the 13 weeks to 31 December.
The business is also investing in its digital offering, with the rollout of click-and-collect to 130 stores across the UK, enabling customers to collect their parcel in under 60 seconds, and its Scan & Shop service, which lets customers use their phone to scan and bag food items as they shop.
Upcoming store openings include:
New full line store:
New full line stores (relocations):
New foodhalls: