#ConsumerCorner: A league of their own - what the retail trading updates tell us about 2024

The Christmas winners and losers league table (non-food) has been something of a January tradition for as long as I can remember. Arguably, these updates are now setting the tone for the year to come across the entire retail industry. As we are entering the second half of January, readers have a pretty good idea of what is ahead for the sector with trading updates having clearly laid the foundation for economic data for 2024. They give excellent insights into what the future holds.

Firstly, I think it is important to put things into perspective. The latest BDO High Street sales tracker shows that total like-for-like sales fell by 1.6% in the week ending 7 January compared to a 13.7% increase in 2023. I know that the ‘weather is for wimps’ (NB: this is not my saying but a reference to a famous quote from a well-known retail CEO), but the first week of the year started wet and windy and gradually moved to drier and colder weather with temperatures dropping. The same week last year saw unsettled weather with strong winds and intermittent showers. Partially as a result of this, footfall decreased by 2.6% this week compared to the equivalent week last year. High street footfall rose 0.6%, shopping centres fell by 5.3% and retail parks’ footfall fell by 6.5%. Not a particularly rosy start to the year.

The general retail trading updates started with a bit of a bang, however. Next’s retail bellwether status was further established last week when the company raised its forecasts for the fifth time in eight months. It now expects to achieve a pre-tax profit of £905mn – 4% higher than last year. Wow…right? One analyst told me on the day of the results that Next had only missed its profit guidance given in January once in nearly 10 years, and that was for 2020 when shops closed during the pandemic. Perhaps Next is just brilliant at guiding the market.

Meanwhile, M&S reported a better-than-expected 8.1% rise in sales over the Christmas trading period, driven by growth in food but also a strong performance in womenswear. Other both private and listed companies reported good updates.

Others, not so good: Burberry, Kering, H&M, JD Sports and Superdry suffered setbacks with all blaming the abnormally mild autumn and challenging consumer environment for weakened demand. Shares are plummeting, valuations are dropping, and investors are really jumpy. No one seems keen to put money into retail but performances from the ‘better’ companies are showing signs of optimism for the sector. This is of course caveated by ongoing tensions in the Red Sea which are starting to disrupt supply chains and push up shipping costs. Meanwhile, the UK’s own economy is far from buoyant, and consumer confidence – although improved – is still in negative territory.

So, what is in store for 2024? We said in SEC Newgate’s 2024 outlook that during what looks like another year of turbulence for the sector, it will be important for retail businesses to continue to innovate, finding ways to create efficiencies and leverage new technologies such as artificial intelligence. Most importantly, the focus in 2024 needs to be on the all-important customer journey, ensuring all touch points are covered to drive that crucial sale. A robust growth strategy and customer engagement will ensure companies can emerge as winners. It is about ensuring consistent transparent communications across multiple touchpoints because the one thing all stakeholders hate (and particularly investors!) is surprises.