Total Christmas sales increased 13.4% year-on-year on average (up 9.7% on a like-for-like basis, for those who report it).

While this is resoundingly positive on the surface, it is off the back of the Omicron concerns that hampered Christmas 2021 sales. Consumers largely reconnected with physical stores, with in-store sales up 18.6% year-on-year (for those who release a breakdown) versus a 5.9% uplift for digital sales.

Many labelled Christmas 2022 as the return to ‘normal trading’; however, this rhetoric should perhaps be challenged. It was the first festive period in three years to not have social restrictions, which drove pent-up demand (an anomaly in itself), accompanied by postal and rail strikes, double-digit inflation and the first-ever Winter FIFA World Cup. So, this strong retailer performance should still be celebrated, but with acknowledgement of the above comments.

A helicopter view by sector

By sector, supermarkets reported another strong festive period, up 12.7% year-on-year on average (off the back of a 2.1% increase in 2021). This was, in part, driven by grocery price inflation reaching 14.4% in December 2022, while, according to Kantar, the actual volume of goods sold declined on a year-on-year basis.

Discount grocers led the growth, as consumers actively sought cheaper alternatives. Aldi reported record sales, up 26% year-on-year and reaching £1.4 billion for the first time, whilst Lidl sales surged 24.5%, recording an additional 1.3 million customers.

Despite not quite reaching the levels of the discounters, supermarket giants Tesco and Sainsbury’s each recorded robust sales growth, as they each focus on loyalty programmes and price matching schemes to attempt to discourage consumers from switching to alternatives.

Trading down hasn’t just impacted grocery sales, with the budget-end of the homeware sector outperforming. B&M reported UK total sales growth of 10.3% and increased its full-year guidance, as Dunelm’s extended sales period supported a 17.6% year-on-year uptick. Meanwhile, other homeware/electricals operators remain challenged by consumers cutting back on bigger ticket items. Currys reported a 6% drop in like-for-like sales (although remains confident with its previous profit guidance), whilst Halfords lowered its guidance by between £5m–£25m in the face of softening demand for high ticket items.

Investing into store networks and digital channels concurrently has helped many fashion retailers, with Click & Collect services proving particularly valuable this year as retailers with a stronger omnichannel offer managed to navigate through the rail and postal strikes.

Total sales at Next exceeded expectations by £66m, driven by a 12.5% year-on-year uptick in physical sales. In turn, the retailer raised its full-year 2022/23 profit forecasts, alongside a more cautious outlook for 2023/24.

Quiz, Seasalt, Crew Clothing and Reiss all reported promising uplifts in sales, again, supported by double-digit physical sales growth, with increased socialising over Christmas referred to as a driving factor. M&S saw like-for-like clothing sales increase 8.6% as its market share rose to the highest level since 2015, helped in part by less competition from House of Fraser and Debenhams. This was followed by the announcement of 20 new store openings this year, including various ex-Debenhams sites.

Bucking the trend seen over the last few years, it was online-pureplay operators that faced deeper challenges this Christmas, hindered largely by postal strikes but also against a backdrop of strong performance in 2021. ASOS and Boohoo reported declines of 8% and 11%, respectively, whilst cost-saving exercises at both companies take grip, resulting in numerous redundancies. Other online retailers (In The Style, Very Group, Ocado, Naked Wines, to name a few) also reported challenges over the festive period.

What can the trading statements tell us about the year to come? Four key takeaways:

Despite Christmas trading largely exceeding expectations, many retailers revealed a cautious outlook. Next, for example, expect full-year 2023-24 sales to fall 1.5% amid cost of living pressures and peaking inflation. A large sample of operators also revealed cost-saving initiatives to facilitate pressure on margins. M&S and ASOS have outlined cost-saving targets of £150m and £300m, respectively, this year, whilst Seasalt mentioned actively managing costs until H2 2023.

Collaborations and acquisitions have and will continue to be pivotal for retailer growth. FatFace thanked brand partnerships with M&S, John Lewis and Next as a key factor for returning to growth in 2022. Reiss products were moved to Next’s online platform, supporting strong digital sales of 22.3% over Christmas and a similar trend reported at Crew Clothing. Further partnerships and acquisition opportunities could continue to suit the larger, cash-strong retailers in 2023, whilst helping brand reach of smaller operators.

2023 store expansion plans aren’t limited to discount retailers. Yes, Greggs, Aldi, Asda Express and Primark each outlined further sites for potential growth, but promisingly, so have M&S, Mango, Dune, Flannels and Hotel Chocolat. So, while a few retail failures in 2023 are somewhat inevitable with cost pressures accelerating, the impact on vacancy could be relatively minimal compared to previous economic shocks.

In summary, a handful of retailers lifted full-year profit guidance, and a few were revised downwards, however, the vast majority remain confident in their previous projections. While it is promising that retailers aren’t downgrading forecasts in the face of macro-economic challenges, it is worth noting that many current forecasts were devised in Q2–Q3 2022, at a time when the invasion of Ukraine was particularly prevalent, the UK political landscape was being shaped by Liz Truss’s mini-budget and the outlook for inflation growth was still largely unknown. As inflation begins to stabilise and consumer purchasing power improves, perhaps we will start seeing retailer forecasts being revised upwards in the second half of 2023.