Christmas 2023 -Unpicking performance

Headlines about the Bank of England reporting an expected increase in defaults on unsecured lending and on mortgage payments, combined with the latest retail sales figures from the ONS, make for bleak reading, especially as November retail sales figures were widely viewed as better than expected. However, the reality is more nuanced than the headlines would suggest.

Retailer trading statements have been widely viewed as positive to date, with positive figures from a wide range of retailers, both grocery and general merchandise (Retail week Christmas trading league table).  On the face of it, grocery has seemed to have had a good Christmas – Aldi, Lidl, Heron Foods, Sainsbury’s, Tesco, M&S, Ocado and even Fortnum & Mason have all reported good year on year increases, albeit across differences in reported trading periods. This is despite the ONS’s Public opinion and social trends bulletin reporting that 46% of adults were planning to spend less on Christmas food or presents. There’s no doubt that consumers are adjusting their shopping patterns, but with results from grocery retailers being positive so far, does this mean bad news for the other big players?

In terms of general merchandise, M&S and Next are generally a good bellwether of trading, and they both had a good Christmas. Next’s in-store sales were broadly in line with Christmas 2022 which was extremely encouraging given that issues around fulfilment had contributed to Christmas 2022 in-store sales increase of +12.5% vs 2021. The issues contributing towards JD’s modest increase of +1.8% vs 2022 has been well documented elsewhere, but historic performance suggests this is a blip rather than a seismic shift.

In the last few days there have been some more negative figures coming out. Luxury brands including Burberry and Mulberry reported sales declines and big ticket retailers Curry’s and DFS have also reported declines, an indicator that consumers are holding off on high value purchases. Although given the traffic around my local shopping centre, Bicester Village, over Christmas, there is still a definite demand for luxury brands...at the right price.

The performance of the value sector is concerning. The Works reported -4.9% over the Christmas period and B&M and Poundland both reported low like for like sales increases of 1.1% (UK sales only) and 0.9% respectively, likely to be seen as disappointing given the latter brands were ideally placed to capitalise on the demise of Wilko. This may well be a blip, but given the core customers for value brands are less affluent groups who are the most vulnerable to increased cost of living, it could be a sign that they cutting back even further on essentials.

Across the Ellandi portfolio, December footfall was broadly in line with 2022 (-0.7%), trading ahead of the national average (-2.6% according to Shoppertrak). A definite highlight was the opening of Frasers, Flannels and Sports Direct in Blackpool contributing to a +15% year on year increase in footfall.

In terms of retailer performance, we’re seeing a similar picture to the national average. Mass market fashion performed very well, but upscale fashion and jewellery weren’t so strong, but it’s notable that these were comparing off an extremely strong trading environment at the end of 2022.  F&B also performed very well, and it wasn’t just ‘coffee and carbs’ as we saw within the 2023 Real Shopper Survey, but casual dining also showed growth vs 2022.

At Ellandi we talk a lot about how data informs our strategy and that's even more important in a challenging economic climate. Over the next few months I will continue to keep a close eye on occupier performance, to aid our understanding of how wider economic issues are impacting our occupiers and our shoppers, and to feed into investment, leasing and asset management strategies.