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Marks & Spencer reports a 2.1 per cent drop in food sales over the Christmas period

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Winners and losers on the High Street: Tesco's gamble to adopt budget supermarket tactics pays off as it joins Aldi and John Lewis as big Christmas winners - but Debenhams, M&S and Halfords struggle

  • Tesco reports 2.2% rise as it outperforms the market in food and clothing sales 
  • And John Lewis says its sales rose 1.4% to £2.2billion but full-year profits will fall
  • But M&S reports 2.4% fall in clothing and home sales, while food sales drop 2.1% 
  • Sales at Debenhams down 3.4% as gross transactions fall 3.8% over Christmas

By Mark Duell for MailOnline

Published: 02:13 EST, 10 January 2019 | Updated: 04:40 EST, 10 January 2019

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Tesco and John Lewis have emerged as festive winners after recording a rise in sales over Christmas - but Marks & Spencer and Debenhams both reported falls.

Tesco's cut-price deals on 'Festive 5' vegetables, lamb and beef joints helped it report a 2.2 per cent rise in UK like-for-like sales over the festive period. 

It follows positive results for budget supermarkets this week as Aldi saw sales jump 10 per cent over Christmas after a surge in demand for its premium products.

But M&S said today it had a 2.4 per cent fall in like-for-like clothing and home sales over its Christmas quarter to December 29, while food sales dropped 2.1 per cent.

Like-for-like sales at Debenhams were down 3.4 per cent over the Christmas period as it saw gross transactions fall 3.8 per cent in the six weeks to January 5.

However, Tesco has reported a 2.2 per cent rise in UK like-for-like sales over the festive period as the supermarket unveiled Christmas trading figures.

And the John Lewis Partnership said its sales rose 1.4 per cent to £2.2billion in the seven weeks to January 5, but it still expected full-year profits to fall substantially. 

The FTSE 100 index at 8.45am was down 34.51 at 6872.12, while the pound at 9am was $1.2751 compared to $1.2763 at the previous close. 

John Lewis annual staff bonus is under threat

The John Lewis Partnership has warned that its annual staff bonus is under threat for the first time in living memory as it battles challenging trading conditions. 

Around 83,000 staff are usually awarded the payout in March, but the retailer said today that it expects profits to be 'substantially lower' this year amid slower sales growth, meaning the bonus could be axed.

Chairman Sir Charlie Mayfield said: 'The board will need to consider carefully in March, following the usual process, whether payment of a bonus is prudent in the light of business and economic prospects at that time.'

It would be the first time since 1953 that staff have not received an annual bonus.

The bombshell announcement came alongside the firm's Christmas trading update, which saw the department store chain book like-for-like sales growth of just 1 per cent in the seven weeks to January 5.

While fashion, beauty and womenswear performed well, the firm said profit margins remain under pressure in what is an 'intensely competitive pricing environment'.

Comparable sales at sister chain Waitrose rose by only 0.3 per cent, despite a sharp reduction in the level of promotions.

Department store total sales were up 2.5 per cent to £1.16 billion and Waitrose sales grew 0.2 per cent to £1 billion. Total sales across the Partnership were up 1.4 per cent over Christmas to £2.2 billion.

The firm said that Black Friday contributed to the biggest sales week in John Lewis' history. However, Sir Charlie struck a downbeat note: 'Two main factors are affecting the retail sector - oversupply of physical space and relatively weak consumer demand.

'We continue to expect full year total Partnership profits to be substantially lower this year, driven by slower sales growth over the year and margin pressure in John Lewis & Partners along with higher costs, mainly as a result of our continued investment in our IT capability.'

The retail sector is coming under intense pressure as consumer confidence takes a knock from Brexit worries and costs rocket. At its half year trading update in September, The Partnership saw profits crashed 98.8 per cent to £1.2 million.

Tesco posted a rise in like-for-like sales in the six weeks to January 5, outperforming the wider market in food, clothing and general merchandise.

The retailer enjoyed its strongest rate of growth in Britain since December 2009 - and had its biggest UK Sunday sales day on record on December 23 last year, serving 766,000 customers in just an hour at one point.

Across both the UK and Ireland, comparable sales were up 2.6 per cent. 

Tesco said its 'Festive 5' Christmas vegetable offer proved particularly popular with customers.

This sold 19.7 million units over the three weeks to Christmas. Promotions on lamb and beef joints also helped drive sales.

For the third quarter as a whole, Tesco recorded comparable UK sales growth of 0.7 per cent, down from 2.5 per cent in the previous three months - but the 12th consecutive period of positive figures nonetheless.

Over the 19 weeks to January 5, the supermarket saw like-for-like sales grow 1.2 per cent in the UK.

Chief executive Dave Lewis said: 'As a team we have achieved a lot in the last 19 weeks. In the UK we delivered significant improvements in our competitive offer and this is reflected in a very strong Christmas performance which was ahead of the market.'

The results come amid a difficult time for the retail sector, as consumer confidence takes a knock from Brexit worries.

Supermarkets are battling rising costs and fierce competition in the sector as Lidl and Aldi continue their relentless march.

As part of efforts to position the supermarket to meet the challenges of a rapidly changing market, Mr Lewis has forked out £3.7billion to acquire cash-and-carry business Booker.

He also launched Jack's, a discount chain that will supposedly rival the German discounters. Booker like-for-like sales shot up 6.7 per cent over Christmas.

Mr Lewis added: 'We have more to do everywhere, but remain bang on track to deliver our plans for the year - and as we enter our centenary, we are in a strong position.'

Mr Lewis said that 'sensible' Brexit contingency planning is under way and Tesco is working with suppliers to stockpile goods. However, he sounded the alarm bell over fresh food.

'It's hard to contingency for fresh food, where we can't stockpile. Like other retailers, we'd be keen that there is no friction at the border given the UK imports half of the fresh food it eats.'

Tesco's update is the latest from the so-called Big Four supermarkets, which also includes Sainsbury's, Asda and Morrisons. 

Morrisons reported strong figures on Tuesday, while Sainsbury's, which is attempting to merge with Asda, posted a poor set of results yesterday.

Tesco has reported a 2.2 per cent rise in UK like-for-like sales over the festive period as the supermarket unveiled Christmas trading figures
Tesco has reported a 2.2 per cent rise in UK like-for-like sales over the festive period as the supermarket unveiled Christmas trading figures

Tesco has reported a 2.2 per cent rise in UK like-for-like sales over the festive period as the supermarket unveiled Christmas trading figures

At Debenhams, comparable sales in the UK were 3.6 per cent lower than last year due to weak store footfall.

Card Factory posts warning over profits

Card Factory has warned that underlying profits for the 2020 financial year are likely to be flat, as it braces for another 'difficult' trading period.

It comes after a 'challenging' Christmas period for the company, with like-for-like sales down 0.5 per cent.

The retailer said it still expects to deliver earnings of between £89million and £91million for the current financial year.

Shares in Card Factory were down more than 9 per cent in early trading today.

Card Factory revenue was up 3.4 per cent in the 11 months to December 31.

Like-for-like sales growth was broadly flat at 0.1 per cent.

Chief executive Karen Hubbard said footfall on the high street was lower than last year, but that like-for-like sales were in line with the third quarter performance.

Overall for the year to date, group revenue grew 3.4 per cent. This was largely due to the 51 new store openings, which brought the total estate to 973.

Card Factory has also said it would mitigate growing costs such as the National Living Wage and electricity prices. 

Debenhams has unveiled declining sales over Christmas, but said it is still on track to deliver on profit expectations. 

The high street retailer saw like-for-like sales dip by 3.4 per cent in the six weeks to January 5, weighed down by the UK where sales were 3.6 per cent lower due to weaker footfall.

But the group defied predictions from the City that it would issue a profit warning over the period.

Digital sales rose 6 per cent in the period, despite a slower start to the peak shopping season.

Chief executive Sergio Bucher said the results were the 'best possible outcome' in an uncertain time for retailers.

The company warned that the UK trading environment is still 'volatile', with savvy consumers actively seeking out discounts.

This will result in some erosion of the retailer's profit margin in the first half, after it slashed prices to keep up with competitors.

Mr Bucher said: 'We responded to a significant increase in promotional activity in the market, particularly in key seasonal categories, in order to remain competitive for our customers. 

'We have taken decisive steps to maintain rigorous cost and capital discipline, and I am grateful to my colleagues for their hard work as we maintain a rapid pace of change.'

Debenhams has embarked on a major strategic shift, including the shuttering of 50 outlets and the launch of a new store design concept.

The company said today that the new format stores had outperformed other sites, with the strongest sales increase at Stevenage.

But Michael Mulligan, partner and insolvency specialist at law firm, Shakespeare Martineau, said of the figures: 'Debenhams' business has been in long-term decline and the plans implemented last year haven't worked.

Marks & Spencer has reported a 2.4 per cent fall in like-for-like clothing and home sales over its Christmas quarter to December 29, while food sales dropped 2.1 per cent
Marks & Spencer has reported a 2.4 per cent fall in like-for-like clothing and home sales over its Christmas quarter to December 29, while food sales dropped 2.1 per cent

Marks & Spencer has reported a 2.4 per cent fall in like-for-like clothing and home sales over its Christmas quarter to December 29, while food sales dropped 2.1 per cent

'It is no surprise that its lenders have looked to FTI Consulting to advise on a make-or-break restructuring which is likely to involve the closure of many stores and the loss of thousands of jobs.

Sales down 1.6% for bargain retailer B&M 

Bargain retailer B&M has reported a 1.6 per cent fall in like-for-like revenues over the 13 weeks to December 29.

However, it said comparable sales lifted 1.2 per cent in December after a 'difficult' November.

The fall in UK trading over the quarter marks a sharp reversal on the 3.9 per centsales surge seen a year earlier.

But B&M said December's positive trading momentum has continued into early trading in January, with trading 'starting well' in the new year.

Simon Arora, chief executive of B&M, said: 'Despite the broader economic uncertainty over the last quarter, B&M is on track to deliver a record year for both sales and earnings, representing our fourteenth consecutive year of profit growth.

'The business' ability to manage profitability through uncertain trading conditions is testament to the resilience of the business model and the strong operational controls we have in place.

'We continue to open new stores and win market share when other retailers are retrenching.'

He added: 'I am pleased by the December trading and the positive momentum with which we enter 2019.'

'As hard as it may be, it's essential for company directors to recognise that their business is failing and put plans in place at the earliest opportunity to react to changing market conditions.' 

Marks & Spencer has insisted it is seeing 'encouraging early signs' despite further falls in clothing and food sales over its Christmas quarter.

The retail bellwether said like-for-like clothing and home sales dropped 2.4 per cent over the 13 weeks to December 29 while comparable food sales fell 2.1 per cent.

Total clothing and home sales fell by 4.8 per cent as it was knocked by a raft of store closures under its overhaul.

The group said while unusually warm weather and falling consumer confidence made for a 'very challenging' November, overall trading in its third quarter was 'steady with some early encouraging signs'.

M&S also confirmed it remained on track for its full-year profit guidance.

Chief executive Steve Rowe said: 'Against the backdrop of well-publicised difficult market conditions, our performance remained steady across the period.

'Our food business traded successfully over Christmas as customers responded to improved value. Our transformation programme remains on track.'

The group said it did not take part in Black Friday discounts and held off from discounting ahead of Christmas, despite heavy promotional activity across the high street.

Mr Rowe said he did not regret the decision, which meant it went into the post-Christmas sales with around 25 per cent less stock - its smallest sale for five years.

He added that the group saw a late sales surge, due to the extra weekend before Christmas.

Like-for-like sales at Debenhams were down 3.4 per cent over the Christmas period
Like-for-like sales at Debenhams were down 3.4 per cent over the Christmas period

Like-for-like sales at Debenhams were down 3.4 per cent over the Christmas period

As with other food retailers, the group suffered pressure on sales from falling inflation, with M&S prices falling around 2 per cent in the quarter as it lowered prices to shift away from promotional discounts.

Worst festive trading for retailers since the 2008 financial crisis 

Retailers suffered the worst Christmas since 2008 and the financial crisis, a leading index has found, as even frantic discounting failed to lure shoppers in December.

Sales growth flatlined last month, showing 0 per cent growth year-on-year, according to the closely followed British Retail Consortium-KPMG retail sales monitor.

Last Christmas, the index registered total sales growth of 1.4 per cent year-on-year, but retailers were unable to keep up that pace this time around, even with heavy price cuts.

On a same-store basis, UK retail sales slipped 0.7 per cent, compared with a 0.6 per cent uplift in December 2017.

BRC boss Helen Dickinson put it down to shoppers being more cautious about how they spent their money in the uncertain run-up to Brexit, and warned that things could get worse for retailers in 2019.

But Mr Rowe said he was encouraged by the 'first steps' to turn around the fortunes in its food halls. The figures come at a time of severe upheaval at the chain.

M&S recently drafted in former Sainsbury's boss Justin King to join the board as a non-executive as the high street firm undergoes the next phase of a drastic transformation plan under Mr Rowe.

As part of the programme, spearheaded by Mr Rowe and chairman Archie Norman, M&S is seeking to save costs through store closures, shutting distribution centres, streamlining its corporate structure and ramping up digital operations.

Clive Black, an analyst at Shore Capital, said: 'In markets widely characterised elsewhere as volatile, challenging, promotional and tough, the backdrop could have been better for sure for Marks & Spencer, which has delivered third quarter trade a little better than our recent expectations.

'Quite what the next quarter brings for M&S and the wider UK retail and consumer economy, given a farcical political situation, remains to be seen.'

Meanwhile pub group Mitchells & Butlers said like-for-like sales rose 4.7 per cent over the 14 weeks to January 5 and jumped 12.3 per cent over the key two-week Christmas period. Shares in M&B lifted 5 per cent after its update.

Phil Urban, chief executive of M&B, said: 'We are delighted with our performance over the festive trading season, with record trading on all key festive dates, including sales of over £12million on Christmas Day, and like-for-like sales growth of 12.3 per cent over the core two-week period.

'The weather was milder than last year but the results were also due to the months of planning put in by our teams, and to several of our Ignite initiatives beginning to bear fruit.

'We now enter our toughest quarter and, given the success of the festive trading period, we would expect trade to be quiet at least until people get paid again.

'The ongoing uncertainty around Brexit will continue so we remain cautious about the outlook until the political and macroeconomic landscape becomes clearer. That said, we have made a good start to the year.'

Halfords issues profit warning after mild weather and weak confidence

Halfords has issued a profit warning after mild weather and weak consumer confidence hit its sales.

The car and cycling retailer now expects profit for the 2019 financial year to be between £58million and £62million. Analysts had been predicting closer to £70 million.

The group also expects its 2020 profits to be flat, due to an expectation that consumer confidence will remain weak in the aftermath of Brexit.

Halfords expects consumer confidence will remain weak in the aftermath of Brexit
Halfords expects consumer confidence will remain weak in the aftermath of Brexit

Halfords expects consumer confidence will remain weak in the aftermath of Brexit

It comes after group revenue fell 1.7 per cent on a like-for-like basis during the 14 weeks to January 4.

Retail sales fell 2.2 per cent, with a particularly weak performance in motoring sales, which fell 3.4 per cent as drivers put off buying weather-related products in the balmy autumn.

Cycling was broadly flat, dropping 0.3 per cent. Growth in children's cycling and accessories was offset by a decline in big-ticket adult bikes.

Meanwhile, Autocentres grew by 1.4 per cent, continuing a trend for drivers to maintain existing cars rather than buying new vehicles as consumer confidence dwindles.

Chief executive Graham Stapleton said: 'This has been a challenging third quarter for the business, driven by exceptionally mild weather and ongoing weak consumer confidence.

'Together, these factors have led us to reduce our profit expectations.

'Whilst this has been a difficult period, we have managed costs and margin well and our free cashflow remains strong.

'Halfords is a robust business and we firmly believe that the strategy we outlined in September is the right direction for the business.'

Shares in the company dropped 24 per cent in early trading this morning. 

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