Blood on the high street as retailers suffer their worst year ever

Last year was the worst on record for the sector, and Christmas trading brought little cheer. Matthew Partridge reports.

Last year was the worst ever for British retailers, says Sarah Butler in The Guardian. According to the British Retail Consortium and accountants KPMG, total sales slipped by 0.1% , the worst performance since they began monitoring the sector in 1995. One of the main factors behind the downturn was a 0.9% fall in sales in the “crucial” final two months of the year when many retailers make most of their money. In contrast to the high street misery, online sales rose by 2.6% in November and December.

Sales of clothing and footwear were hit particularly badly, say Andrew Atkinson and Lucy Meakin on Bloomberg. They fell by 2.3% year-on-year in the last three months, with retailers having to offer “deep discounts” to attract customers. This meant that stores from Marks & Spencer to John Lewis ended up being hit particularly hard. It’s not surprising that the retail sector is underperforming the UK market as a whole.

Still, some stores have managed to escape the carnage, as Ashley Armstrong points out in The Times. Next, as so often, impressed investors, growing sales in the final two months of the year by 5.3%. And “despite expectations of no growth”, Dixons Carphone recorded a 2% rise in electrical sales for the ten weeks to 4 January. This was mainly down to increased sales of “supersized flatscreen TVs, Dyson hairdryers and Apple AirPod headphones” during Black Friday, which Dixons managed to stretch into a two-week period. This is good news for the company, which is in the middle of a turnaround programme led by CEO Alex Baldock.

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It’s nice to see that someone is clinging on, says James Moore in The Independent. But don’t bet on Dixons “doing much beyond walking” over the year ahead. For one thing, you have to wonder whether consumers are going to be buying smart speakers or Apple headphones in the same numbers in 2020. In any case, Dixons’ overall sales were only flat thanks to the “bottom falling out of the mobile phone market” as people grow tired of shelling out “for new handsets that aren’t that much different to last year’s models”.

Internet sales: too little, too late?

One thing that should worry traditional retailers is the “lacklustre” performance of their online operations, which were expected to “deliver significant sales growth” to compensate for shrinking physical sales, says Jonathan Eley in the Financial Times. This suggests that many of the big chains are paying the price for having moved online “too late, and with too little conviction”.

M&S saw its online sales go up by only 1.5%, much lower than the results delivered by online-only brands such as Asos (up 15%) and Boohoo (40%). Even Next’s 15% rise in online sales involved “lower-margin sales of third-party products”. While traditional retailers hope recent investment in e-commerce will “bear fruit”, the competition from online-only operators “will only get more intense”.

Dr Matthew Partridge

Matthew graduated from the University of Durham in 2004; he then gained an MSc, followed by a PhD at the London School of Economics.

He has previously written for a wide range of publications, including the Guardian and the Economist, and also helped to run a newsletter on terrorism. He has spent time at Lehman Brothers, Citigroup and the consultancy Lombard Street Research.

Matthew is the author of Superinvestors: Lessons from the greatest investors in history, published by Harriman House, which has been translated into several languages. His second book, Investing Explained: The Accessible Guide to Building an Investment Portfolio, is published by Kogan Page.

As senior writer, he writes the shares and politics & economics pages, as well as weekly Blowing It and Great Frauds in History columns He also writes a fortnightly reviews page and trading tips, as well as regular cover stories and multi-page investment focus features.

Follow Matthew on Twitter: @DrMatthewPartri