Christmas trading figures from some of Britain’s biggest retailers next week look set to underline the fierceness of the battle on the high street.
Analysts are forecasting that Tesco will report a relatively poor Christmas, as its £500m of price cuts look unlikely to have revived underlying domestic sales.
Marks and Spencer is forecast to report a fall in underlying clothing sales amid ferocious discounting, the first decline over the crucial Christmas period for three years. But it may have enjoyed stronger food sales.
According to figures on Friday from consumer research group Nielsen, Asda was the winner over the crucial period, while Tesco was the weakest of the big four supermarkets.
According to Nielsen, Asda enjoyed sales growth of 10.7 per cent in the four weeks to December 24. J Sainsbury lifted sales by 6.7 per cent, while Wm Morrison’s increased by 5.9 per cent. Tesco increased sales by 3.4 per cent, while M&S’s food sales rose by 6.5 per cent.
However, this Christmas includes an extra day’s trading, which could account for 2-3 percentage points of sales.
JPMorgan Cazenove, joint broker to Tesco, forecasts that Britain’s biggest supermarket chain by market share will report a 1.5 per cent decline in UK sales from stores open at least a year, in the six weeks to January 7.
That would be a deterioration on the 0.9 per cent year-on-year decline that Tesco reported for the 13 weeks to November 26, and a 0.3-0.4 per cent decline over Christmas 2010-11.
Philip Dorgan, analyst at Panmure Gordon, said he expected Tesco to be the underperformer.
Tesco chief executive Philip Clarke has been reviewing the UK business and Clive Black, analyst at Shore Capital, said he expected Tesco to announce plans in April to rein in its aggressive supermarket expansion, refresh stores and prioritise food over non-food, possibly cutting back on some areas.
Analysts at Royal Bank of Scotland, broker to Morrison, forecast like-for-like sales growth of 0.6 per cent in the six weeks to January 1, although others suggested that the performance would be much better than this.
At M&S concern is rising about the impact of heavy discounting in its general merchandise business, in the first Christmas over which chief executive Marc Bolland has been in full control.
The consensus of analysts’ forecasts for the quarter is for a 1.5 per cent fall in UK like-for-like sales of general merchandise, including clothing, with the range from flat to down 2.5 per cent. This would be the first decline since Christmas 2008. UK like-for-like food sales are forecast to increase by 1.5 per cent.
A number of analysts have pared this year’s pre-tax profit forecasts for M&S, including Deutsche Bank, which cut its prediction from £690m to £676m.
Concern has also focused on the performances of homewares, where M&S has struck high-profile collaborations with Dutch industrial designer Marcel Wanders and Habitat founder Sir Terence Conran. But another analyst warned there was a history of M&S outperforming lowered expectations for the company.
A poor Christmas could put pressure on Mr Bolland to cut costs. He has yet to take an axe to the group’s overheads, with some within the business having been braced for job cuts for some time.
“The one thing that Bolland has not yet done is address the cost base. It is a lever that he could pull sometime through 2012,” said one seasoned M&S watcher.
This would also come amid speculation over whether Kate Bostock, head of general merchandise at M&S, will remain with the group. She has held advanced talks with Asos, the online retailer.