British merchants seeking miracle on High Street this Christmas
LONDON — British retailers relying on Christmas to save their year may need a miracle.
December retail sales in the country will be no better than last year's $57 billion, according to Deloitte. That would be the first holiday with no growth since 2008, when the financial crisis that followed the collapse of Lehman Brothers caused consumers to cut back.
“It's as tough as anyone can remember and with sales flat at best this year it's going to be harder than ever before to be in the winners' enclosure,” Ian Geddes, retail partner at Deloitte, said in an interview. Only those with strong online offerings are likely to prosper, he said, as consumers seek cheaper prices and convenience by ordering over the Web.
Deloitte estimates that British retail sales will be stagnant until 2013 as consumers face job insecurity, government spending reductions and rising prices. Dixons Retail and Home Retail Group's Argos may be among the most affected as shoppers cut back on purchasing larger items such as televisions, said Matthew Stych, an analyst at Planet Retail. Weak holiday sales could bring “carnage” as some retailers struggle to make quarterly rent payments, he said.
Inflation was 5 percent in October, with the consumer-price index near the highest since records began in 1997.
The prospect of slow holiday sales has already led some retailers to start discounting as they seek to entice shoppers. Debenhams, Britain's second-largest department-store chain, said last week it will drop prices by as much as 40 percent for five days starting Nov. 16. That compares with discounts of as much as 25 percent last year.
William Morrison Supermarkets, the smallest of Britain's four main food retailers, said it's offering 100 million pounds of price cuts, promotions and rewards through its Christmas collector card program this year.
Debenhams shares are down 8.4 percent this year, while Marks & Spencer Group, Britain's largest clothing retailer, has dropped 10 percent. Consumer-electronics retailers are doing worse, with Dixons shares falling 51 percent and Home Retail declining 59 percent.
Sellers of electronics products will face some of the “strongest headwinds” over the holiday, hurt by competition from online retailers, weak consumer confidence and the lack of a “must-have” gadget, according to Fitch Ratings.
“Retailers had seen 3-D televisions as one possible area of strong demand this year, but so far the reception has been lukewarm and prices have dropped sharply,” said Fitch analyst Simon Kennedy.
Online retailers such as Amazon.com will be “the big winners” over the holiday, according to Planet Retail's Stych.
John Lewis Partnership, owner of the largest British department-store chain, is among retailers that may benefit most from a shift in consumer behavior toward mobile ordering, online kiosks in stores and home delivery, Stych said. The retailer has rolled out free Wi-Fi in its stores and “click and collect” points where customers who order online can arrange delivery to their local store or Waitrose grocery chain.
Debenhams is installing kiosks on every floor of every store so shoppers can order out-of-stock items, while Marks & Spencer is testing them in three outlets.
Deloitte's forecast of unchanged holiday sales is supported by London's West End shopping area, which expects Christmas business to match last year's. Revenue is up 4 percent so far this year, driven by sales of luxury goods, according to New West End Company Chairman Judith Mayhew.
The outlook for spending in 2012 isn't encouraging.
“Next year is no good, partly because it's the first full year of spending cuts, but also job insecurity and uncertainty from the euro zone crisis,” Deloitte's Geddes said. “Those combined mean customers being much more cautious.”