A last-minute shopping flurry saved Christmas for Britain’s retailers as price cuts of as much as 90 percent finally persuaded consumers to part with their cash.
Tesco Plc, Britain’s biggest supermarket chain, could say today that sales growth strengthened over the holiday, joining Marks & Spencer Group Plc, Next Plc and J Sainsbury Plc in avoiding the reductions to profit forecasts made last week by US retailers Wal-Mart Stores Inc and Macy’s Inc.
The number of Britons shopping rose 13 percent in the last week of last year after seven weeks of decline. Most British retailers cut prices and started the season with less inventory in anticipation of weaker sales. In the US, consumers shunned even discounters and were less loyal to their favorite chains when they did buy, picking the cheapest items.
“Britons were a lot more careful about when and how and why they spent money at Christmas, but it’s not been as apocalyptic as many feared,” Planet Retail analyst Bryan Roberts said in London. “There’s no getting around the fact though that this year is going to be absolutely dreadful.”
Revenue at Tesco’s British stores open a year or more probably rose 2.5 percent in the six weeks ended Jan. 3, according to the median estimate of 10 analysts surveyed by Bloomberg News. That would be stronger than the 2 percent increase in the third quarter, which was the slowest growth since 1993. Total sales climbed 11.5 percent, according to the median of seven estimates.
Tesco stepped up price cuts toward the end of last year to stem a switch by shoppers to discounters Aldi Group and Lidl. The Cheshunt, England-based retailer began a £100 million (US$153 million) sale on Dec. 26 with savings of 50 percent or more on goods from clothing and bedding to televisions and laptops.
Wal-Mart, Macy’s and Gap Inc slashed earnings forecasts last week after the worst holiday-shopping season in 40 years. US same-store sales last month dropped 1.7 percent, the International Council of Shopping Centers reported.
Wal-Mart said on Thursday that apparel sales were weak in the US, Canada and Japan. Asda, the US retailer’s British supermarket chain, said revenue beat its forecast.
British consumers “tend to be a bit more fixed in their shopping behavior,” while Americans have shifted theirs “dramatically,” Roberts said. “US consumers didn’t show up and when they did they were looking for discounted product, choosing to shop in different stores.”
Sales declines reported last week by Marks & Spencer, the largest British fashion retailer and department-store chain Debenhams Plc were smaller than analysts’ estimates. Revenue at food retailer Sainsbury also beat predictions, while John Lewis Partnership Plc’s department stores increased sales by 27 percent in the week ended Jan. 3 and Next maintained its profit forecast.
“It is somewhat surprising that it hasn’t been really brutal,” said Roger Appleyard, head of global credit research at RBC Capital Markets in London. “I’m still holding my breath, there isn’t an exhalation of relief about 2009.”
Marks, Next and Debenhams all started the holiday with reduced inventory in anticipation of weaker sales. Marks and Next started their clearance sales on Dec. 27 with 15 percent and 8 percent less stock, respectively. Inventory at Debenhams was down 7.3 percent as of Jan. 3, the company said this week.
The 19-member FTSE 350 General Retailers Index has risen 9.3 percent since Dec. 30, led by Debenhams’ 48 percent advance. Marks, which weakened 62 percent last year, climbed 14 percent during the period, while Wal-Mart slid about 5 percent.
“It’s a relief rally,” said RBC’s Appleyard of the gains in British retail shares. “The stocks were pricing in a lot of bad news. We got some, but not as bad as the market feared.”
British consumer confidence fell to the lowest since at least 2004 last month, contributing to the collapse of Woolworths Group Plc and music chain Zavvi.
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