Mild weather, big discounts, and the weak pound help lift retail sales in Britain's capital to a three year high, but results were weaker around the country
London's retailers posted their best sales for more than three years in November, raising hopes of a bumper Christmas for shops in the capital.
John Lewis, the department-store chain, added to the optimism by delivering the best weekly sales in its 145-year history. However, the British Retail Consortium (BRC) dampened premature festive celebrations by noting that retailers in the capital were up against dire sales last year when the financial turmoil hit consumer confidence. Like-for-like sales in the rest of the UK also rose by a more modest 1.8 per cent last month.
In November, underlying retail sales in central London soared by 13.3 per cent, boosted by the unseasonably mild weather, widespread discounting and the influx of overseas visitors from Western Europe, said the BRC-KPMG survey. The uplift was the capital's strongest since October 2006 and compares with sales falling at an annual rate of 0.4 per cent in November last year during the maelstrom of the financial crisis. Stephen Robertson, the director general of the BRC, said: "These figures show London retailers have had a very encouraging start to Christmas with even big-ticket items doing well."
The BRC said that food sales were robust and in-store restaurants benefited from the soggy November weather. Retailers also helped themselves by launching special sales events and discounts, which lifted sales of homewares, furniture, clothing, footwear and accessories, as well as beauty and gift products. Last month, footfall in central London was the best since June, 3.6 per cent higher than in November 2008, according to Synovate Retail Performance.
Helen Dickinson, the head of retail at KPMG, said: "The weakness of the pound has certainly continued to attract overseas visitors who were out in the capital's department stores in force."
Over the three months to the end of November, central London's retailers averaged 8.2 per cent growth in underlying sales, compared with 4.1 per cent across the rest of the UK. One factor helping to boost overall UK retail sales is less discounting than this time last year. As of last Friday, 60 per cent of UK retailers were advertising discounts or promotions, such as three-for-two offers, which compared with 80 per cent of retailers in the same week last year, according to the accountancy firm PricewaterhouseCoopers.
Mark Hudson, of PwC, said: "Discounting outside of the grocers on the high street is less deep and widespread than it was in 2008. There was near-blanket discounting in clothing and footwear last year, but it is currently much less aggressive and more specific, due to better managed stock levels and improved consumer confidence."
In a further sign of festive optimism, John Lewis, the high-street bellwether, saw record sales of £110m last week, continuing its recent streak of buoyant weekly sales. The department store cited strong sales of fashion, brands, watches, sewing machines and gaming, as well as "stellar sales" of toys helped by the exit of Woolworths.
Andrew Murphy, the director of operational development at John Lewis, said: "In toys, we have been absolutely cleaning up and making a killing in the last six weeks." He added there was significantly more demand for traditional toys, such as train sets and wooden building blocks.
He said it appeared that consumers had been over-cautious with cutting back on spending earlier in the year. "There is no sense of it being a budget Christmas for people, although there is no doubt that people are doing their price-matching homework."
Despite signs that Christmas 2009 will be better than last year, retail chief executives remain cautious, if not a bit downbeat, about next year. But Mr Murphy said: "Our money is on a reasonable but not over-spectacular 2010."
A Boost for HMV
HMV Group (HMV:LN) expects its Waterstone's book chain to get a late pre-Christmas shopping boost following the collapse of Borders UK, as the failed bookseller's closing-down sale comes to an end. But the owner of the HMV entertainment retailer will get a much bigger uplift next year if the Borders chain of 45 stores, with annual sales of more than £200m, disappears as expected.
Its comments on Borders, which collapsed into administration last month, came as HMV Group posted a reduced pre-tax loss of £24.9m for the half-year to 24 October, compared with £27.5m last year. Total sales at the group rose by 5.6 per cent to £797m.
Simon Fox, the chief executive of HMV Group, said: "The UK book market became progressively tougher during our first half and has remained difficult, as evidenced by the recent administration of Borders. In the medium and long term, the potential withdrawal of a competitor may, of course, benefit Waterstone's." He added it was considering buying "one or two" Borders stores.
Waterstone's like-for-like sales tumbled by 5.1 per cent in the first half. In recent weeks, Waterstone's has been hit by the closing-down sale at Borders, which is currently offering many products at a 60 per cent discount.
Mr Fox said: "You do see a lot of cheap stock flooding into the market, which clearly diverts business from us into that heavily discounted closing-down frenzy." HMV has also benefited from the disappearance of Woolworths and Zavvi at the start of this year. In areas where stores overlapped, Mr Fox said that HMV had enjoyed "significant market-share gains" in both music and video.
The group is currently mulling a take-over of its joint venture partner Mama, the live music group, but did not comment further yesterday. On Thursday, HMV bought a 8.2 per cent stake in Mama, which runs venues including London's renamed HMV Apollo.
Over the half year, HMV UK & Ireland recorded underlying sales up by 1.6 per cent, which were boosted by increasing its revenues on technology and related entertainment products.
The retailer said it had captured share in a "weak" computer games market. It has also rolled out the mobile phone operator Orange's (FTE) concessions to 20 stores and more are expected in the second half. Total sales at HMV UK & Ireland rose by 12.8 per cent to £470.7m, boosted by 32 stores acquired from Zavvi.
HMV expects plenty of Christmas cheer from music sales generated by current and former X Factor contestants, as well as Susan Boyle, the star of Britain's Got Talent. Mr Fox said: "It's a very good Christmas for music, led by the whole X Factor effect and Susan Boyle's quite remarkable sales performance."
However, underlying sales fell by 11.1 per cent at HMV International, which suffered from tough trading in Canada, Hong Kong and Singapore, along with a weak release schedule of computer games.