British retailers report unexpected growth over Christmas period

Debenhams and Morrisons defy the odds, while German discounters push on

The figures from Debenhams are all the more surprising given the lacklustre performance of rivals Next and Marks & Spencer. Photograph: Brian Lawless/PA Wire

The figures from Debenhams are all the more surprising given the lacklustre performance of rivals Next and Marks & Spencer. Photograph: Brian Lawless/PA Wire

 

There was some good news on Tuesday for Morrisons and Debenhams as both defied gloomy expectations by checking in with better-than-expected Christmas trading figures.

It shows how bad things have become at Morrisons when a wafer-thin rise of 0.2 per cent is judged a triumph. But it was the supermarket group’s first increase in underlying sales in four years and smashed City forecasts for a fall of 2 per cent. In the previous quarter, sales had declined by 2.6 per cent and by as much as 3.3 per cent the previous Christmas.

Chief executive David Potts, a former Tesco executive, took over the top job at Morrisons almost a year ago after the sacking of Dalton Philips and has been battling to restore its fortunes. His back-to-basics strategy was beginning to encourage customers to return to the stores, he said, and new shoppers were choosing Morrisons.

It wasn’t all good news, though, as Morrisons announced it was to close another seven loss-making stores, putting almost 700 jobs at risk. This follows the closure of 21 stores last year.

Shares in the group, which was recently booted out of the prestigious FTSE 100 index, celebrated the unexpected sales rise by surging 12 per cent, although they later closed about 8 per cent higher.

Dramatic surge

The figures from Debenhams are all the more surprising given the lacklustre performance of rivals Next and Marks & Spencer. Expectations had, as usual these days, been low for M&S, but the normally reliable Next was a real disappointment as it warned a week ago of the impact of the warm weather.

Debenhams boss Michael Sharp appears to employ better weather forecasters than Lord Wolfson, his opposite number at Next, however, as he boasted of anticipating the mild snap and deliberately cutting back on supplies of coats and other winter clothing in anticipation.

“It’s quite obvious for everybody to see that over the last few years the weather has been somewhat unseasonal,” he said. “We have learnt the lessons.”

It remains to be seen whether Sharp will be feeling quite so pleased with himself later this week, when the cold weather is forecast to arrive.

But there was certainly a warm glow around Debenhams shares on Tuesday after the upbeat update, as they rocketed 16 per cent, to 76.5p.

Some of the sector’s other unloved stocks were also given a lift: Tesco, whose shares recently hit an 18-year low, added almost 7 per cent as analysts reckoned its trading news on Thursday might not be as bad as feared.

Shares in Sainsbury’s, which reports today, were up about 4 per cent.

Latest market share data from research firm Kantar Worldpanel underlined the market’s view that Sainsbury’s was doing the best job among the “big four” supermarket groups of withstanding the assault from German discounters Aldi and Lidl. According to Kantar, it was the only one of the four to increase its market share over Christmas, by 0.1 per cent to 17 per cent, with Tesco, Asda and Morrisons all falling.

Winners and losers

With Morrisons and Debenhams surprising on the upside, there are more retail winners this year than expected. But there are plenty of losers, including Sports Direct, Bonmarché and Game Digital, all of which have issued profit warnings. Discounter Poundland, which trades in Ireland as Dealz, also turned in a disappointing performance.

The full picture of how the high street has fared will become clearer when the reporting season reaches its climax on “Super Thursday” tomorrow.

Fiona Walsh is business editor of theguardian.com