Who will be retail’s winners and losers in 2023?

Neil Saunders, managing director for retail, GlobalData

Winner: Frasers Group

Frasers Group has been steadily building an empire, growing both organically and through acquisitions. The company now has a great portfolio of brands and is operating in some segments – such as premium lifestyle – which are a bit more insulated from economic pressures. More Flannels stores, which bring together many of the premium lines, will open in 2023 and should do well in markets outside London, which are somewhat underserved by brands.

The addition of homewares via the recent purchase of Amara will give the group more credibility in new categories, which it can grow. In the core sportswear business, things are a bit more challenging, but Sports Direct has a solid value proposition, which should serve it well – especially if it invests in some of its more tired stores. Across the year ahead, there will be further opportunities to acquire distressed brands and retail assets should the group wish to do so.

Loser: Wayfair

While Wayfair is huge in the US, it is less well-known and relatively immature in the UK. However, international expansion is an important part of the company’s narrative and management has been keen to emphasise the fact it has global opportunities for growth. The problem for Wayfair is that it doesn’t make any money. Indeed, it makes huge losses – which are particularly acute in the international division. Sadly, there doesn’t seem to be any pathway to profitability, which is highly problematic.

With the UK housing market under pressure and consumers more cautious about making big-ticket purchases, Wayfair will be doubly pressured in 2023. If losses sharpen, it may need to reconsider its international plans and potentially withdraw from markets. The business has never really seemed to understand the UK, especially the fact that it is already very well served – online and offline – by some very well-established and credible players. The question it needs to ask itself is whether it feels it can make enough of a long-term impact to make current losses acceptable. 

Hugh Radojev, news editor, Retail Week 

Winner: Gymshark 

This might not be the boldest choice, given it has gone from strength to strength financially over recent years, but there are few retail businesses better set up for success in 2023 than Gymshark.

In a post-Covid landscape where customers are flocking back to stores, the sportswear brand has just opened its new flagship on Regent Street. But the retailer has learned the lessons of the past few years: it’s not simply enough to build it and they will come. The store is as much a fitness hub for its growing ecosystem of customers as it is a place to buy clothes.  

Gymshark also has not forgotten its ecommerce roots. Its social media savvy has seen it quietly build a vast US business, without ever really ‘entering’ the territory in a traditional sense. It is also fast becoming a recognisable brand logo, whether in the gym or on the street, all while retaining a sense of ‘cool’.  

Loser: Matalan 

With the dire economic situation besetting the UK likely to stretch on into 2023 and beyond, one might expect a discount chain like Matalan to do well. However, the retailer has never really recovered from the shock of store closures during the pandemic. This year, it seems, the situation has only got worse. 

Saddled by more than £500m in debts accrued over the last few years, a year of spiralling inflation has also taken a toll. Trapped between a rock and a hard place, the business has been up for sale since September. 

While the deadline to repay its debts has been pushed back from this coming January until next summer, time is running out for the business. 

As has been reported, founder John Hargreaves is making a last-ditch bid to keep control of the company. However, the Hargreaves family has poured tens of millions into the business of late, with little to show for it. 

Lisa Byfield-Green, research director, Retail Week

Winner: Boots

Over the past couple of years, we have seen some resurgent legacy retailers, so my suggestion for 2023 is that we might expect this to be the turn of Boots. The potential sale of the business is on hold and, finally, Boots has re-platformed and sorted out its website. It put in an impressive performance over Black Friday and has broadened its offer through its marketplace. If it can similarly reinvigorate its stores, it has the potential to really do well next year.

As other sectors are hit by the cost-of-living crisis, the health and beauty sector continues to grow so there is some major opportunity up for grabs. Boots will also be upping its game as new competitors such as Sephora look to gain a foothold, so hopefully, we can expect some interesting innovation from them this year.

Loser: Amazon

Slightly controversial and, of course, I do not really think that Amazon will be a loser exactly in 2023. However, we can expect that its previous stratospheric levels of growth will be more muted this year. It’s the first time in its history that we have seen the company falter and it will be interesting to observe the process as it sheds staff and conducts a strategic review across its operations.

No doubt Amazon will double down investment in areas that customers really care about and come back stronger in 2024. But the next 12 months are likely to be more challenging for it and other major (mainly) pureplays as customers in major markets revert to omnichannel shopping and rein in discretionary spend.

Nick Bubb, independent analyst

Winner: Marks & Spencer

In looking for a recovery play for 2023, it is tempting to look at the badly beaten-up online pureplays, but for many of them the pain may only just be beginning and an old stockmarket adage is “never catch a falling knife”. Instead, a safer bet should be good old M&S.

In 2022, M&S should have performed well, as it had a foot in both the food price inflation beneficiary and clothing recovery camps, so it is disappointing that the shares halved. Yet the food business is getting better and better, taking market share thanks to strong ranging, marketing and better pricing. Much-improved stores are helping the clothing business reconnect with customers.

There are still things to do and the Ocado deal isn’t looking as clever as it once did but, with a fair wind, the M&S share price should be looking a lot better in a year’s time.

Loser: Card Factory

There is surely more pain to come for online pureplays in 2023, even after the pain in 2022, and Moonpig is one company that has been in the spotlight recently given its perceived reliance on Royal Mail for Christmas deliveries. Despite falling about 70% in 2022, the Moonpig share price has more downside potential, but there might be even more downside in its high street rival, Card Factory, which has been one of the positive surprises of 2022 (the shares are over 25% up).

Not everybody has to post a card, fortunately, but the collapse of consumer confidence in the postal service cannot be helpful in that regard. And while Card Factory has a good ‘value’ offer in these troubled economic times, not everybody wants to shop at a high street specialist, given the ranges available in supermarkets. These structural issues may return to haunt Card Factory in 2023.

George MacDonald, executive editor, Retail Week

Winner: Asda

After a slow-burn start following its takeover by the Issa brothers two years ago, Asda looks as if it may be getting its mojo back. The grocer’s sales growth of 6.1% was ahead of the market, the latest Kantar data showed, and it held its market share steady in contrast to its big-four rivals. 

Asda also seems to be rediscovering a ‘we’re on your side’ affiliation with its customers, which was a distinguishing characteristic of its most successful periods. Cut-price meal deals for kids and OAPs are in tune with the times and it is benefiting from its value heritage. It is also pushing into new fields, such as convenience, opening opportunities for growth.    

Loser: John Lewis

Inflation may perhaps have peaked, but the consumer environment remains tough and the department store business will have to fight for spend as shoppers continue to watch their cash in the new year.

The launch of the Anyday value range has helped John Lewis navigate stormy waters, but the discretionary nature of much of what it sells and fuzzy value positioning – the ‘Never Knowingly Undersold’ price pledge was abandoned – could put the retailer under pressure.

John Lewis has closed a significant number of shops since the pandemic. While online has become a more important part of the mix across retail, stores have bounced back big time. But there are now swathes of the country where John Lewis stores are few and far between. Traditionally, the reassuring presence of stores has boosted retailers’ online sales. Does it now have too many eggs in the online basket?

Richard Lim, chief executive, Retail Economics

Winner: Boots

As the UK economy heads into recession and consumers further tighten their belts, Boots will be well positioned to benefit from shoppers trading down to cheaper alternatives and own-brand options in a sector that is largely non-discretionary.

Our data also shows that a pandemic-induced shift towards digital across health and beauty has proved to be more permanent than other parts of the industry. Its vastly improved digital proposition has captured new customers, with the channel maintaining significant gains (around +100%) on 2019 levels. Next-day click and collect, an extended partnership with Deliveroo and new online health services appear to be successful.

Digital innovation with new online health services could also provide significant growth opportunities as the industry undergoes disruption, adding to the wealth of data they command, boasting more than 15 million Advantage Card members.

With an increasing number of hard-pressed consumers seeking discounts and offers in a physical environment, its presence across high streets, out-of-town and local pharmacies will support those under the most financial pressure while supporting a more connected digital customer journey.

Loser: B&Q

B&Q saw sales surge throughout the pandemic as consumers revamped home interiors, braved DIY projects and kitted out home offices as homeworking became necessary. However, it feels like this momentum can only wane throughout 2023 as spending cycles that were brought forward collide with homeowners delaying – or cancelling – projects as the cost-of-living crisis bites.

Housing affordability will become a key issue for large swathes of homeowners looking to remortgage as interest rates continue their upward trajectory. We’re already seeing signs of a housing market slowdown, which is critical for this part of the market. The number of housing transactions is key for new DIY purchases, while falling/slowing house prices can create a negative wealth effect, denting consumer confidence.

Although the retailer could benefit from the ‘improve, not move’ trend experienced during times of hardship, with energy-saving products proving popular, it is going to be tough to replicate the successes seen over the last couple of years. 

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