It was a tale of two regions for Britain’s Boxing Day sales. While London’s hallowed shopping arteries—Oxford Street, Regent Street, Sloane Street and Bond Street—saw a 15 percent increase in footfall from 2017 by the end of Boxing Day, the rest of the country reported one of the least successful sales days since 2008.
According to market research firm, Springboard, there was a 4 percent reduction in shoppers hitting the sales on Dec. 26 across the country, with regional high-streets and out-of-town shopping centers—the latter of which saw 7 percent fewer visitors year on year—the hardest hit. Many blame the massive discounts offered around Black Friday, which is a relatively new phenomenon in the U.K., the uncertainty generated by Brexit and the weak pound.
The disconnect between the capital and the rest of the country is largely due to the tourism effect. An estimated 50 million pounds ($63.8 million) was spent on Oxford Street and Regent Street alone on Boxing Day—much of it by the hundreds of thousands of visitors who come to the city in the hope of finding particularly good bargains since the pound dropped in value after the 2016 referendum.
However, London alone cannot save the British retail industry and brands needed a particularly good Christmas period to make up for the bleak year that came before. In 2018, the headlines came in thick and fast: House of Fraser was on the brink of liquidation while Marks & Spencer, Next, New Look and John Lewis were hit with job losses and enforced store closures.
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Menswear brand Greenwoods declared insolvency in the run up to Christmas and Sports Direct CEO Mike Ashley said trading was so bad for many chains it “will literally smash them to pieces.” Even online wasn’t safe as ASOS posted some of the worst results since the 2008 crash.
By Jan. 2, the stock market showed very little confidence in British retail, with Marks & Spencer becoming the U.K.’s second most shorted stock, while 10 percent of shares in Debenhams were on loan to short sellers.
But by Jan. 3, Next and John Lewis had reported their results, going some way to soothe retail fears. Next reported sales growth of 1.5 percent for the last two months of 2018 and as a result, its shares jumped by 4 percent to 43.50 pounds ($55.55), the biggest FTSE 100 riser.
“[Next’s] numbers were solid and respectable,” said retail analyst Richard Hyman. “They will look much better as the next few weeks unfold, with the rest of the trading statements demonstrating yet again that Next is atypical. More than half its sales are now online. It only goes on sale seasonally, to clear stock and has avoided the massive damage caused by frequent discounting across the market. The company is better managed than its peers, with tight, consistent leadership. While it might be thought unexciting and a little bland, Next is risk averse and reliable. Over the years, these characteristics have helped to set the company apart.”
John Lewis—another barometer of the market as a whole—also fared better than expected. Sales were up 4.5 percent in the week to Dec. 29 compared with the same period last year. Sales also rose 4.2 percent in the preceding week. Fashion in particular fared well, with a rise of 11 percent.
But while this is undoubtedly good news, British retailers can’t breathe easy just yet.
John Lewis’s “never knowingly undersold” policy forces it to match rivals’ price cuts and December 2018 was one of the most heavily discounted Christmas periods in recent years. So, while the brand may have achieved high sales figures, its profitability could still be in question.
Equally, these two brands cannot speak for the market as a whole. “In world of uncertainty, consistency is a haven,” Hyman said. “And a reliable feature of the retail calendar is Next’s Christmas Trading Statement being greeted as if it represents the industry as a whole. It doesn’t.”
And while their rivals are yet to release their Q4 figures, what is becoming clear is that even though Christmas is shaping up to look a little more bountiful than we had first thought, Q1 2019 will still be beset by problems.
“Let’s be clear about what is happening out there right now. We are in a retail recession” said Hyman. “I don’t have as technical a definition as economists have for the wider economy. But what is clear is the combination of excess supply and a consumer indebtedness, pressured household budgets, plus the gravest political and economic uncertainty in modern times, adds up to the most challenging trading year U.K. retail has ever seen…Looking ahead, one thing is 100 percent guaranteed. 2019 is certain to be materially tougher.”