A more detailed picture of trading conditions in the UK over the Christmas period will emerge this week when high profile retailers including Marks & Spencer and Sainsbury’s post trading updates.
Marks & Spencer is expected to return to like-for-like sales growth for the first time in more than two years when it posts its post-Christmas update on Wednesday.
The company is trading against far easier comparisons than in 2008, when it registered a 7.1% fall in same-store sales at the height of the recession – its worst performance since 1999.
This steep decline eased to just 0.5% for the July-September period while chief executive Stuart Rose said he had been “encouraged” by recent trading as the panic among shoppers over the impact of recession begins to subside.
The group, which unveiled Morrisons boss Marc Bolland as its new boss in November, has gained market share in clothing and improved its lagging food performance.
But the sales figures should also reveal the extent of the damage from fierce supermarket competition in the build-up to the festive season.
Tesco in particular took on Waitrose and M&S with heavy promoting on its Finest premium ranges before Christmas as it plays on a greater willingness to indulge among shoppers.
Clive Black, analyst at Shore Capital Stockbrokers, said he expected M&S to produce “low single digit” like-for-like sales growth.
He added: “It should be a steady Christmas for Marks. A resurgent Waitrose will have been a thorn in the group’s side and we don’t expect it to have matched the momentum at Waitrose, but it will have been solid as Marks benefited from a trading up across the market.”
Supermarket Sainsbury’s will reveal how this year’s festive sales compared with the record Christmas trading of 2008 when it releases third quarter figures on Thursday.
The chain hailed its best-ever Christmas a year ago, with 22.6 million customers in the final week before Christmas and its busiest ever trading day on December 23.
Like-for-like sales excluding fuel rose 4.5% in the 13 weeks to January 3 2009, but this year competition has been tough across the sector and plunging food price inflation has put sales figures under pressure.
The adverse weather in the week before Christmas will also have given food retailers a logistical headache, according to retail analyst Clive Black of Shore Capital Stockbrokers.
But he believes it was a “pretty solid, steady” Christmas for supermarkets, with the trend for shoppers to trade up and treat themselves having helped sales.
The latest market data from TNS Worldpanel revealed this gave Sainsbury’s a fillip in the 12 weeks to November 29, with its market share up from 15.9% to 16.1%.
Mr Black said the chain was likely to have been out-paced by Morrisons, which he believes will have performed better than all its main rivals this year.
He is pencilling in like-for-like sales growth in the low single digits for Sainsbury’s, as its quarterly figures continue to ease back amid falling food inflation.
Comments on non-food will also be interesting, he added, with supermarkets expected to have benefited from the space left by collapsed retailers such as Woolworths and Zavvi.
Next will be watched closely for comments on the post-Christmas sales period when it releases a festive trading update, expected on Wednesday.
Record numbers of shoppers hitting the high street for the St Stephen's Day sales rush has raised expectations for the festive retail performance this year after a disappointing run up to the holiday.
Next has pleased investors with better-than-expected news over the last year, leading to a sharp rise in its share price to more than 2000p in 2009.
It said its shoppers were in better financial shape than first feared in November as it upped its sales forecasts for the remainder of the financial year.
The chain said the high street climate had been “more benign” than anticipated in the three months to October 31, helped by “encouragingly low” inflation and interest rates.
In September it pencilled in like-for-like sales declines of between 3.5% and 6.5%, but in its last trading update Next forecast a worst-case 3% slide and said sales could even hold steady against last year in the six months to the end of January.
However, the festive selling season is key and the market will be keen for news on whether trading held up.
Last year’s Christmas period was tough for the whole sector, but Next was praised by the market for holding firm on its prices in the approach to the festive season.
While its sales slid 7% between the end of July and Christmas Eve 2008, the group had a healthy start to the post-Christmas sales.
Broker UBS is hoping for an even better festive session this year. It lifted its target price on the group to 2250p from 2050p this month and said it expected Next’s Christmas trading statement to show sales at the better end of the guidance for second half like-for-like growth of flat to minus 3%.
Sportswear retailer JD Sports Fashion has been one of the strongest high street performers during the recession as it plays on its strong fashion offering through brands Scotts and Bank.
The firm has also been helped by the distractions facing rivals such as the Office of Fair Trading’s probe into Sports World owner Sports Direct, as well as JJB’s near-demise earlier in 2009.
Analysts will be expecting more good news from the company in its latest trading update on Thursday – although there are signs that Sports Direct is beginning to get its act together after raising profit forecasts for the second time this year.
Like-for-like growth for the fashion and sports brands were running at 2% and 0.5% respectively in September but JD said at the beginning of the month that trading had “marginally improved” in the 11 weeks since then, despite “strengthening” competition in sports.
Singer analyst Matthew McEachran highlighted the international growth opportunities for the business – such as through Lille-based retailer Chausport - as well as the strength of the Canterbury rugby brand acquired last year.
But he added: “The main growth driver within the group relates to its Fashion division, primarily the recently acquired Bank chain.
“The most recent trading update triggered a forecast upgrade, highlighting Bank as the catalyst, and there is considerable scope for profits to improve if they continue to enhance the product and brand mix.”
York-based Persimmon’s trading update on Thursday should give the latest snapshot of a housing market gradually improving from the lows seen early in 2009.
The Charles Church builder – which has been alone among major housebuilders in not raising equity to weather the slump during the past year – said in November that it expected to carry a “healthy” order book into 2010.
But its comments were laced with caution about the fragility of a market faced with the threat of higher unemployment and lingering problems with mortgage availability.
A lack of the higher loan to value mortgages generally needed by first time buyers is still a “significant concern”, the firm added.
Despite the worries over 2010, Persimmon should still have completed the sale of around 9,000 homes in 2009, compared with just over 10,000 in 2008.
It saw strong visitor levels and a low cancellation rate of around 16% – while it has made faster than expected progress in slashing the debt on its balance sheet.
Citi analyst Clyde Lewis is among the bulls on housing shares, arguing that recent share dips on fears of a ’double dip’ recession have been overblown.
He said: “The concern over the last few months has come principally from macro UK worries about 2010. We think these are overdone with respect to the impact on the sector’s profitability and in particular asset values.”
On Persimmon he added: “We continue to feel that its track record as well as its strategic and normal land banks warrant a healthy premium rating within the sector.”