What have we learnt from the recent retail trading updates?

It is that time of year when all eyes are on the retail Christmas trading updates. Why are Christmas trading updates important? Well, they set the benchmark for the year to come and what we have seen thus far suggest that retail is bracing itself for a challenging year.  

Last week the BRC came out with their data for festive period and really set the tone for the wider industry. It said: “following a challenging year marked by weak consumer confidence and difficult economic conditions, the crucial ‘golden quarter’ failed to give 2024 the send-off retailers were hoping for”.  The BRC also confirmed our fears and that the sector will be hit hard this year following increased tax burden and “with little hope of covering these costs through higher sales, retailers will likely push up prices and cut investment in stores and jobs”.  

This narrative was further reinforced by the likes of Next, Tesco, Marks and Spencer, Sainsbury who have already provided their updates. Despite showing robust figures, particularly for the food businesses, most have warned the market of a challenging year and weaker demand as business costs mount and inflation creeps up. ​Investors in UK retail shares are considering the broader implications of theses figures and economic pressures as well as ever changing consumer behaviours. 

If you think about it the last five years, the UK retail sector has been batted down with a number of challenges: Brexit, Covid, inflation, interest rates, increased competition. geopolitical tensions, political instability, cost pressures and talent shortages to name but a few issues. Against this backdrop of unrelenting recent challenge, surely 2025 will be a less ‘eventful’ year one could argue but these Christmas trading updates are telling us the opposite.  

Pressure will be intensive in 2025 and to navigate this environment, leaders will need to be continually innovating, transforming and pushing forward simply to maintain their competitive advantage. Whilst this year could be challenging, we have seen the enduring strength of the sector coming through the year and there is no doubt that,  as consumer confidence slowly returns, so will investment in retail.