Do you believe in Santa Claus?

January 2009

Christmas 2008 was the worst in 14 years that the British Retail Consortium have produced their survey with like for like sales down 3.3% in the month of December and total sales down 1.4% on the same period a year ago.

These difficult results do however mask some divergence of performance.  The clear winners were in the value sector, those focussing on young fashion and online players.  Less successful were those retailers focussed on big ticket, home products and jewellery.

The grocers have again performed well, helped in part by some underlying inflation but offset by a trend to trading down from premium ranges to value ranges.

What remains to be seen is the impact of promotional activity on margin and cash.  A PwC sample of 100 retailers showed that 75% were on sale by the start of December, rising to 90% by 23 December.

We expect 2009 to see a significant level of retailers facing refinancing or restructuring as the difficult economic conditions continue.  We anticipate that this will lead to a need for a ruthless focus on cash and cost base, increased co-operation throughout the value chain and significant caution in forward buying and store portfolio expansion.