U.K. Retailers Offering Most Discounts Since 2008, PwC Reports

Dec. 14 (Bloomberg) -- U.K. retailers are offering the most holiday discounts since 2008 as they promote online deals and cut prices in stores to boost sales at the end of a tough year.

A survey by PricewaterhouseCoopers LLC found that 69 out of 100 town center retailers reduced prices this week or advertised promotions such as three products for the price of two. That compares with 66 percent last year, 55 percent in 2010 and 63 percent in 2009, the accounting firm said today by e-mail.

Marks & Spencer Group Plc is among companies that have offered online-only holiday promotions for the first time this year, such as 20 percent off on Dec. 3. Retailers are relying on Christmas sales to help rescue a year when high unemployment and the debt crisis have blighted spending. Still, analysts such as Exane BNP Paribas’ Ben Spruntulis say the deals are “rational,” with little evidence of distressed discounts.

“While our U.K. store visits and online review suggest a rising level of promotional activity, this looks well planned and there is little evidence of the distressed discounting of previous years,” Spruntilis said in a report today.

The average discount on offer this week was 36 percent, compared with 45 percent last year, PWC’s survey showed.

HMV Group Plc, the U.K.’s biggest retailer of CDs and DVDs said it has seen success from exclusive or industry-leading promotions such as five blue-ray DVDs for 30 pounds. Still, the company also said it will probably breach debt covenants next year amid lower-than-expected Christmas sales.

‘More Discerning’

“The customer is more discerning, they’re being more careful, they are spotting the value and buying into it,” HMV Chief Executive Officer Trevor Moore said yesterday.

The large number of promotions “suggests that there is now a base level of activity which is seen as necessary to be ‘in the game’,” Mark Hudson, retail and consumer consulting leader at PWC, said in the report. “However for now the depth of discounting may reflect retailers keeping their powder dry.”

The “new norm is headline price-grabbing initiatives,” Nick Robertson, CEO of online retailer Asos Plc, said of the U.K. market. “We are headlining promotions, discounts to drive traffic, but the result on the margin line is insignificant.”

Shoppers are keeping budgets “very tight,” J Sainsbury Plc Commercial Director Mike Coupe told reporters yesterday at the supermarket chain’s Kiln Lane store in Epsom, England.

“Whereas five years ago they would have spent indiscriminately,” today they are “more thoughtful,” and planning more carefully how they think about shopping, he said.

To contact the reporter on this story: Sarah Shannon in London at sshannon4@bloomberg.net.

To contact the editor responsible for this story: Celeste Perri at cperri@bloomberg.net