Retailer’s Christmas performance was mixed but it definitely wasn’t the worst on record.

There was a distinct lack of news on individual retailer Christmas trading performance this year. Rather all the media focus was on the headline sales figures from the BRC and ONS, which painted a very negative story, a story much preferred by the press.

But, was the 2019 Christmas period “the worst on record” as the news headlines suggest? To put it simply, no it wasn’t. True, the December sales data from ONS doesn’t look great with sales volumes excluding fuel up 0.7% year-on-year, underperforming the 3.2% seen in 2018. Yet, let’s not forget that before the recovery from the global financial crisis took hold in 2011, December 2010 volumes actually declined 1.9%; now that was a bad Christmas. It’s also worth flagging that this data from the ONS is seasonally adjusted, the ‘real’ performance (non-seasonally adjusted) figure actually looks a lot stronger with sales volumes up 3.2% vs the 2.0% seen the previous year.

These data points are a picture of the overall market. What is more pertinent when it comes to retail property is how the individual retailers fared and whether this tells us anything about what parts of the market are trading well. Also, does this provide any insight into the parts of the market that will support occupational demand in 2020?

Looking at the 31 retailers we tracked for this analysis, it was definitely a mixed bag. However, we didn’t see the same scale of slowdown as indicated by the headline ONS data with some retailers actually reporting an acceleration in sales growth.

Across this sample, total sales over the festive period were up a respectable 5.0% on average, one percentage point down on the same period in 2018. Of these, half (16) reported better 2019 Christmas results than the previous year, up by almost 400 basis points on average, and include names such as Next, Primark, Mountain Warehouse, Lidl, Pets at Home and Halfords. For some of these retailers, the improvement in total sales was helped by store expansion, although others, such as Pets, B&M and Halfords, were also able to improve like-for-like performance.

Looking exclusively at total sales can hide some intricacies within trading results, one of which being the impact of e-commerce. For the 19 retailers that reported Christmas online sales, online clearly helped total performance with online sales up 13.0% on average, albeit a slowdown on the 17.3% reported in 2018.

This is in sharp contrast to the 0.5% decline reported for in-store sales, although this is based on a much smaller sample of 12 retailers. But again, these headline figures don’t tell the full story and need to be considered as part of a retailer's wider omnichannel offer and the potential role stores play in driving online sales. This is most apparent in the case of Click & Collect, which on the whole is not attributed to store performance but to the online platform. For example, Next reported that in-store sales were down 3.9%, yet we also know that close to 50% of their online orders are fulfilled through Click & Collect instore.

So, what parts of the market had a good Christmas and those, not so good?

DIY and homeware retailers were the standout performers, increasing total sales from 9.3% in 2018 to 16.7% in 2019. This was driven by a handful of rapidly expanding value retailers such as B&M and Dunelm, where sales growth was helped by store expansion although like-for-likes also remained in positive territory.

On the whole supermarkets continued to perform well, albeit at a slower rate, with average total sales up 2.7% over the festive period. But, like the homewares sector, this was driven by the rapidly expanding value players. Aldi and Lidl each reported total sales growth of 7.9% and 11.0% respectively. It was a different story for the bigger players. Tesco saw flat UK sales with like-for-likes up a marginal 0.1%. Sainsbury’s reported a 0.7% decline in both total sales and like-for-likes, but an improvement on the 1.1% decline reported in 2018.

The weakest part of the market was fashion, but again this was not uniform across the board. On average total sales were up 0.8% significantly down on the 7.1% average seen in 2018. Superdry, Quiz and Joules were the primary drivers of this weakness, although in the case of Joules this was attributed to availability issues on the back of a spreadsheet error. In contrast, Next and Primark reported robust sales growth up on 2018.

Going into 2020, the value players would appear to best placed to capitalise on their Christmas performance. Considering that this part of the market is also the most immune to online as the financials don’t tend to support online delivery, for example, B&M does not offer home delivery across the majority of their stock, we expect demand for new space from these types of retailers to continue. The out-of-town market is set to be the primary beneficiary of this helped by the fact that total occupational costs tend to be lower; a key consideration for the value players. We’ve already seen some of this in 2019 with total new store openings out-of-town reaching a new peak last year with over 1,000 openings.

However, there are some 2020 positives to take away for the entire retail property market. Firstly the election result has delivered greater certainty around Brexit, which has been reflected in consumer confidence. This, combined with the fact that real wage growth remains in positive territory, should deliver some good results for retailers and in turn parts of the property market this year. Yet, it will be the better retailers with a clear and defined offer, and the better retail locations, that will be the winners.