Mixed messages

This week we look at the trading performance of retailers over a very challenging Christmas period, and the trends that emerged.

Channel shift
The major change we saw last year, which was exacerbated over lockdown, was the shift to online shopping. The UK saw the highest increase in online sales since 2007, according to IMRG Capgemini Online Retail Index, up 37% year on year in December. Whilst many retailers' online channels have seen growth, it is physical store sales which have suffered, with footfall across the UK down 46% in the 5 weeks to 2 January, according to BRC-ShopperTrak.

Retailers with strong multichannel offerings  managed to adapt operations and oversee stock to ensure flexibility in the supply chain. At Next stores, for example, sales were down 43% in the 9 weeks to 26 December, but online sales rose 36% year on year. However, non-essential retailers with no online platform have been significantly impacted throughout the pandemic and have been unable to trade for extended periods. Three quarters of Primark stores in the UK and Europe are temporarily closed, including 190 stores in the UK and Primark has reported a 30% fall in sales in the 16 weeks to 2 January, which is set to total a £1bn loss of sales by the end of February.

The significant channel shift also resulted in Christmas spending being brought forward, with  shoppers ensuring timely home deliveries, as well as continued uncertainty surrounding lockdown restrictions. Many retailers also launched sales events early, including Very, who launched their Black Friday event in mid-November.

Category performance

Grocery
The grocery sector has been a clear winner of 2020 which continued into the festive period, with total grocery sales up 11.4% in the 12 weeks to 27 December (Kantar). Lidl reported sales growth of 17.9% year on year in the 4 weeks to Christmas, ahead of the big four supermarkets, and their key competitor Aldi. Grocers have benefitted from the closure of pubs, bars, restaurants, and hotels, resulting in an increase in eating and drinking at home.

With restrictions on mixing with other households, there were smaller celebrations over the festive period. Grocers also noticed a trend of shoppers being more indulgent and treating themselves after a challenging year, including sales of Morrison's premium champagne up 64% and sales of Sainsbury's Taste the Difference range up 11%.

Fashion
The fashion sector was already fiercely competitive before the pandemic and fashion retailers that were already struggling have been hit hard by the impact of Covid. This includes the Arcadia brands (i.e. Topshop and Dorothy Perkins) and Debenhams, which faces impending store closures. However, more reactive fashion brands, such as e-commerce womenswear retailer, In The Style, reported a 169% uplift in sales in the 12 weeks to December, as the brand continues to drive increased awareness through it's influencer collaboration model.

There has also been a shift in demand for fashion products this Christmas, with less need for formalwear, occasionwear and partywear and a heightened demand for loungewear and athleisurewear, with more people working from home and doing home workouts. Retailers including Missguided, M&S and PrettyLittleThing expanded their activewear and loungewear ranges and brands such as Under Armour and Tommy Hilfiger have widened their offers to include adaptive activewear apparel, such as launching hijabs for sport.

Home and variety retailers
Homeware is another winner of 2020 with demand soaring for home improvements. Household goods retailers such as Topps Tiles reported like for like sales growth of 19.9% in the period to December 26 and Dunelm also reported excellent trading in the run up to Christmas, with a 31.1% growth in online sales, benefitting from a transition to a new website, as well as a 1.2% rise in in-store sales in the festive quarter. B&M recorded a 21.1% increase in like for like sales in the 13 weeks to 26 December and as an essential retailer were able to remain open during tier 4 restrictions, benefitting from selling a variety of goods, including household products, confectionery and toys.

Retailers with a strong multichannel offer have held up better than bricks and mortar retailers during one of the most challenging festive periods of late. Further fallouts with current restrictions may implicate retailers further in the start of the new year, such as the rates holiday due to end in March, so it is vital that retailers continue to operate flexible supply chains which can cater for changing shopping behaviours.

Sophie Pisano