Retailers’ Christmas woes to to become clearer this week | Business

Investors will this week gain a clearer picture of retailers’ performances over the crucial Christmas period, as vultures circle the sector after HMV became the first victim of weak sales.

Initial data from Springboard, a retail consultancy, showed that footfall in the week to Saturday fell by around 3% compared with last year, in line with declines seen throughout the Christmas trading period. In-store shopper numbers on Boxing Day fell by 3.1% year-on-year – the third consecutive annual decline in footfall.

John Lewis will report its performance for the previous fortnight on Tuesday, while Next will publish trading figures to 24 December on Thursday.

British retailers had already suffered a difficult 2018, with a raft of store closures announced by major store chains including Marks & Spencer and Debenhams, as the high street contends with the structural movement of shoppers to online alongside weak consumer spending.

“Footfall across the board is lower than last year,” said Diane Wehrle, Springboard’s insights director. “Some of it is down to online, but the increases in online haven’t been as great as they were. People are spending less than they were last year.”

Retailers are among the most shorted companies listed on the London Stock Exchange, as hedge funds bet their share prices will fall.

Marks & Spencer is the second most shorted UK stock, with 10 hedge funds holding short positions of 11.2% – equivalent to almost £440m on Friday – according to data reported to the Financial Conduct Authority. At least 10.3% of shares in Debenhams are on loan to short sellers, as are 8.8% of shares in Pets at Home and 7.8% of shares in Morrisons, the supermarket.

As well as falling footfall, retailers on the high street and online are having to contend with intense competition. Moody’s Investors Service, the credit ratings agency, warned on Friday that footfall snapshots suggest heavy discounting, from Black Friday in November through to the key December period, is failing to boost overall retail spending.

Poor Christmas trading tipped the 97-year-old entertainment retailer HMV over the edge last week. Its second administration in six years has put more than 2,200 jobs in 125 stores at risk.

Sign up to the daily Business Today email or follow Guardian Business on Twitter at @BusinessDesk

Moody’s warned that it expects a further profit decline for the Debenhams department store chain, while for women’s fashion retailer New Look “a weak Christmas could become the catalyst for a balance sheet restructuring”.

However, Next’s profits are expected to hold up better despite the broader footfall decline, after it resisted the wave of discounting which has eaten into rival retailers’ profit margins.

Other major retailers such as Marks & Spencer and Debenhams will update the market on their December performance next week.

Source link