Nightmare before Christmas: High street retailers reveal festive horror

Tesco, Morrisons and M&S all take a bruising as shoppers desert them over the festive period.

by Elizabeth Anderson
Last Updated: 13 Feb 2014

Times are tough on the high street, and even Christmas wasn’t able to provide much cheer for retailers feeling the pressure from online shopping and tighter household budgets.

Morrisons, Marks and Spencer and Tesco, three of Britain’s biggest retailers, have all reported disappointing Christmas trading, with sales down on the previous year.

Morrisons was worst hit, with like-for-like sales slipping 5.6% in the six weeks to January - and the supermarket chain has now admitted that full-year profits will be towards the bottom end of forecasts, near the £783m mark.

Tesco, the UK’s largest supermarket, revealed that underlying sales in the UK fell 2.3% over the same period and overseas sales were down 3.6%. High street stalwart M&S said like-for-like sales were down 0.2%, with home and clothing sales falling 2.1%.

Having long been the market leaders, Britain’s top four supermarkets – Tesco, Asda, Sainsbury’s and Morrisons - have all had their margins wrecked by discount chains Aldi and Lidl.
 
While the traditional giants all suffered over the holidays, the budget chains have had their best-ever Christmas, with sales up by 20% and 10% respectively year on year. Aldi’s rising status was underlined by the fact that it topped the retail sector in Britain's Most Admired Companies awards 2013, rising from fifth in 2012.

The post-Christmas trading update also reflects the change in the way consumers are shopping. Online sales are continuing their rapid growth, with Tesco’s UK web sales jumping 14% to £450m. Morrisons, the only significant British supermarket not to have an online presence, will now launch its web shopping service tomorrow, 17 years after Tesco first started doing home delivery in 1997.

M&S, founded 130 years ago, has also had a difficult year. It has now suffered the tenth successive quarterly decline in home and clothing sales, and its ailing clothing business has become the focus of city watchers, putting pressure on CEO Marc Bolland who, whatever he tries, doesn’t seem to be working at the minute. Inevitably that will further increase speculation both about his own position and the potential of an M&S takeover.

Bolland said sales suffered as a result of an ‘exceptionally unseasonal October,’ but that its food business had an ‘excellent’ quarter with 4.1% growth, while online sales rose 23%.

He said M&S was also forced to compete with other retailers offering heavy discounts to entice shoppers. At first the company held its nerve, but had to react in December and start cutting prices. ‘I must confess this was not an easy Christmas,’ he told analysts.

It isn’t all bad news on the high street though – last week Next surprised the market by posting record Christmas sales, despite withstanding pressure to cut prices.

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