Snow Brings Chill to U.K. Stores as Holiday Spending Sputters
Andrea Hamilton plans to spend about half her usual 150 pounds ($231) on Christmas gifts this year. It’s not job prospects, interest rates or the possibility of increased taxation that’s holding her back. It’s the snow.
“I haven’t been out shopping nearly as much,” Hamilton, 25, said yesterday in the HMV store on London’s Oxford Street. “I’m buying a lot more presents at the last minute,” she said, clutching a Take That CD and a DVD of “The Inbetweeners.”
Britain’s worst early snowfall in 17 years has left many shoppers marooned at home at a time when some store operators make about half their annual sales. Growth in Internet ordering has benefited online retailers, although deliveries of gifts have also been affected by the weather. On average, the snow has pushed retail sales down as much as 15 percent a week, according to Andrew Wade, an analyst at Numis Securities in London.
“At a time when retailers were looking to play catch-up after the snowfall at the start of the month, the latest turn in the weather has dealt another cruel blow,” said Tim Denison, director of Synovate Retail Performance.
The number of shoppers visiting stores in U.K. fell 8.8 percent in the week ended Dec. 18, according to Synovate. On Dec. 19, the last Saturday before Christmas, traffic was down 24.3 percent, the market research company said.
Home Retail Group Plc, owner of Homebase home-improvement stores and the Argos chain; HMV Group Plc, a music and DVD retailer; and Dixons Group Plc electronics outlets are “most vulnerable” to the snowy conditions, according to Numis’s Wade.
“Christmas-focused, low-margin retailers are most vulnerable,” he said. “Food and online will show resilience.”
Liberum Capital analyst Simon Irwin cut his estimates of annual sales for U.K. electronics retailers by 5 percent yesterday. Clothing retailers such as Next Plc and Marks & Spencer Group Plc will be more resilient as shoppers buy coats and sweaters to combat the freezing temperatures, Irwin said.
Alexon Plc, the U.K. owner of the Ann Harvey clothing brand, said this week that the snow will reduce earnings by as much as 1.5 million pounds as its older customer base struggle to reach stores to buy its larger-size clothing. Sales at stores open at least a year fell 19.9 percent in the last three weeks.
Glenn Dodson, 44, said that while he’s finished his holiday shopping, most of his family haven’t. “My son’s still trying to fly home and my wife has done most of hers online, but nothing much has arrived,” Dodson said outside the House of Fraser department-store on Oxford Street.
It’s not just the U.K. that’s being affected as arctic temperatures sweep across much of Europe.
“The weather is definitely having an impact,” said Dino Lemma, manager of the Geox SpA store on Milan’s Vittorio Emmanuele shopping street. “Shoppers that would have travelled in to the city will have been put off by the freezing weather. While in other months we were beating our budget, we’ve been just about meeting it since the really cold weather started.”
Many retailers have started offering discounts to stoke demand. Tesco Plc, the U.K.’s largest supermarket company, started its Boxing Day sale online yesterday with discounts of as much as 50 percent on products such as 22-pound duvets, 10- pound cooking woks and 39-pound five-piece pan sets. Kingfisher Plc’s B&Q chain has also began its sale early, with promotions of as much as 75 percent online and in stores from Dec. 17.
To be sure, weak holiday sales may turn into a post- Christmas “bonanza” as shoppers seek bargains after the holiday, said Nick Bubb, an analyst at Arden Partners in London.
“The shift of spending may have slightly adverse gross margin implications, but on the whole we don’t think too much damage will turn out to have been done to forecasts,” he said.
Retailers such as HMV which depend on Christmas sales may be an exception as shoppers turn to supermarkets for DVDs and books during the snowy weather, Bubb said. The analyst cut his price estimate on HMV to 33 pence from 40 pence yesterday, though retains an “add” recommendation on the stock.
Shares of HMV, which owns Waterstone’s bookstores, have dropped 40 percent this month and closed at 27.75 pence yesterday. The company said Dec. 9 that it was cutting its dividend by 50 percent after the first-half loss widened.
Online sales in the U.K. will probably increase 15 percent this Christmas, compared with growth of about 1 percent in total retail spending, according to estimates by Deloitte LLP.
While the bad weather is disrupting delivery of online orders, December will still be the biggest online shopping month ever, with forecast spending of 6.4 billion pounds, according to the Interactive Media in Retail Group trade organization.
Back on Oxford Street, Hamilton said she was surprised not to see more shoppers flocking for last-minute gifts.
“I’d expected it to be more crazy,” she said.
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