Marks & Spencer is expected to report another fall in underlying sales in both clothing and food in its Christmas quarter, while the major grocers are forecast to show a slowdown in growth as the discounters march on.
Expectations for the UK retail sector going into Christmas were low after industry data showed the largest November drop in shopper numbers for a decade and Sports Direct and Primark issued downbeat comments about trading.
A huge profit warning from online fashion group Asos in mid-December then routed share prices. Music retailer HMV added to the gloom, collapsing into administration shortly after Christmas.
Clothing chain Next is the only major listed retailer to have reported on Christmas trading so far. It sprang a positive surprise with a late surge in online demand offsetting steep falls in sales in stores.
Analysts reckon Next is likely to prove the exception among non-food retailers as the sector battles a perfect storm of rising costs, uncertainty in the economy around Brexit and the structural shift online.
Unlike its rivals, Next has a longstanding policy of not discounting before St Stephen’s Day. Analysts have highlighted a disconnect between supportive economic factors — with consumers’ real earnings growing and employment levels high — and an apparent reluctance to spend, partly due to uncertainty over Britain’s departure from the EU at the end of March.
For M&S, analysts are on average forecasting a fall of 1.6% in like-for-like clothing and homeware sales for its third quarter
to December 28, mirroring the previous quarter’s decline.