It’s been a highly unusual year for retail, which has not been without its casualties. As ‘non-essential’ stores emerge from the second lockdown and shoppers swap Christmas parties for working from home and smaller gatherings, which retailers are set to reap the benefits of an unorthodox festive season?
Latest data from Barclaycard shows that shoppers are keen to spend in the run-up to Christmas, with Saturday December 5 ranking as the biggest day of retail spend in 2020 so far, with 40.6% more transactions than Black Friday last month.
It’s clear that despite, or indeed because of, a challenging 2020 shoppers are keen to make Christmas special this year.
We take a look at some of the retailers who are set up for festive success and those that will struggle to persuade customers to loosen their purse strings.
Winners
B&M
The value general merchandise retailer has had a stellar year as it found itself in a number of sweet spots for shopper preferences.
It sells a broad range of products at competitive prices – appealing to the more value-conscious shopper – was open throughout both lockdowns as an essential business and is located primarily on retail parks, where shoppers can drive up and fill their car boots without having to tackle public transport.
Peel Hunt analyst Jonathan Pritchard says these qualities will continue to serve B&M well in the run-up to Christmas as shoppers look for a one-stop-shop for affordable home decor, garden furniture and stocking fillers.
“The people who went to B&M in April and May when there were very few alternatives have become repeat customers”
Jonathan Pritchard, Peel Hunt
“We know they nailed November trading and I’d be surprised if they didn’t do the same in December,” he says.
“There’s a great deal of longevity in this because the people who went to B&M in April and May when there were very few alternatives were impressed – it has good availability and value for money – and have become repeat customers.”
The Entertainer
The toys sector had a subdued performance last Christmas, but Pritchard is confident this trajectory is likely to reverse this year, due to a combination of many families having fewer outgoings and a desire to treat children who have not been able to socialise or engage in extracurricular activities as normal.
He also points to shopping as an activity that will keep stir-crazy children and parents alike entertained.
“We didn’t shop in November and now it’s one of the few things you can do as a family in December.
“I don’t see people using that as a chance to buy more partywear but, when it comes to treating loved ones and gift-giving in general, that may increase more.”
The Entertainer’s combination of 160 high street and shopping centre locations and its click-and-collect partnership with Asda means it is well-placed to cash in on the money burning a hole in some parents’ pockets in the run-up to Christmas.
Mountain Warehouse
In what has undeniably been a tough year for clothing retailers, consumers are likely to swap their usual Christmas party shopping for more practical purchases.
Against this backdrop, price-conscious outdoors retailer Mountain Warehouse is well-placed to win trade.
The colder weather and regulations around socialising outside to stem the spread of the virus put the retailer in a strong position to capitalise on increased spend from shoppers.
The retailer’s high street and market town locations also mean it is likely to benefit from a surge in more local shopping trips as customers avoid busier central locations for destinations closer to home.
Morrisons
The grocery sector is set for a bumper Christmas all round, but Morrisons’ house broker Shore Capital’s head of research Clive Black insists the supermarket is in a particularly strong position to capitalise on festive spend.
He says the grocer “has really done the right things” during the pandemic so far and “transformed its brand credentials” as a result.
From leading the way on grocery delivery boxes to partnering early with Deliveroo, guaranteeing rapid payment to smaller suppliers and introducing timely Christmas price cuts, Morrisons has made decisions throughout the pandemic that have endeared it to customers.
Indeed, November’s Kantar grocery figures show Morrisons leading the way for the big four, with sales up 13.7% in the four weeks to November 29.
AO.com
The electricals etailer should do well this festive season.
Pritchard points to the fact that many shoppers, who may otherwise have used discretionary spend on holidays or socialising, will have a wad of cash that they may want to spend on white goods, which may not have made for a particularly festive purchase in previous years.
A rise in home working and distanced learning also means household items are going through wear and tear at a more rapid rate than they did when families were outside their homes for five days a week. Shoppers spending more time at home over the festive period may also want a new TV to make those long winter nights more entertaining.
AO.com’s combination of rapid delivery, customer service and online testimonials mean they are in a good position to capture Christmas spend in this category.
Losers
Asda
While most grocers are set to do well this year, Black predicts Asda is likely to be the weakest performer.
“[Asda] lacks a convenience and neighbourhood proposition and so it has been fighting a little with one hand behind its back in the evolving UK grocery market,” says Black – a shortfall in its proposition, which will be exacerbated in the lead-up to Christmas.
Aldi
Controversially, Black also thinks Aldi – a perennial Christmas outperformer – will lag the rest of the sector.
“The business is losing out to Lidl, but also to the rise of online grocery participation, with which it really cannot compete,” he says.
Aldi has begun to ramp up its click-and-collect capabilities in recent months in a bid to capitalise on the online shift in grocery since the start of the pandemic, but this will not come in time to make a significant impact on its festive performance this year.
“The business is losing out to Lidl, but also to the rise of online grocery participation, with which it really cannot compete”
Clive Black, Shore Capital
Indeed, Aldi was the worst-performing of all the grocers in sales-growth terms last month, with sales up 7% – just half that of rival Lidl.
Quiz
Beleaguered fashion retailer Quiz has been struggling all year and Pritchard believes it is particularly vulnerable to poor performance over Christmas.
The retailer, which has historically relied heavily on festive and occasionwear to drive trade, is likely to struggle to capture customer spend in a year in which many shoppers are likely to forego dressing up and nights out in favour of more comfortable casual attire.
Restrictions around socialising also mean the type of clothing Quiz specialises in is unlikely to be in demand this festive season – which, coupled with the fact that it is not represented on popular clothing retailers such as Zalando and Asos, puts it in a tough spot.
Black points to fellow mid-market fashion players, such as New Look, Peacocks and Matalan, as businesses that will also find the festive period hard going this year.
House of Fraser
As competitor Debenhams lurches into liquidation and applies heavy discounts across its ranges, House of Fraser may be forced to apply similar tactics and erode margin or risk losing market share.
Fellow department store operator John Lewis has form in electricals and homewares, which will likely win spend from shoppers looking to make big-ticket purchases without fears about the impact administration may have on their product warranty and insurance.
Meanwhile, M&S can coax shoppers in for festive grocery spend and then lure them into its other departments.
House of Fraser does not have these contingencies to rely on and is, therefore, most likely to lose market share from Debenhams’ fire sale – although owner Mike Ashley may see this as further motivation to acquire Debenhams’ assets as he circles the department store chain.
Card Factory
Limits on shopper numbers in stores and smaller store formats will put greeting cards retailer Card Factory in a tricky spot. Shoppers are unlikely to be tempted by the idea of queuing to get into its stores when they can make a similar purchase at a supermarket or online competitor.
“I don’t think we’ll stop buying cards this Christmas, but I don’t know if we’ll have the patience to shop for them like we used to,” says Pritchard.
Retailers like Card Factory, who rely on their specialist proposition and moving a hefty number of shoppers through their stores at pace, may struggle to offer a compelling shopping experience to customers this year, which could hurt their revenue over Christmas.
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