Retail’s 'golden quarter' proved to be more copper than gold
for many last year as continued structural shifts took effect across the
industry. British Retail Consortium (BRC) figures suggest November-December
retail sales fell 0.9%, resulting in a 0.1% decrease for 2019, which is the
first full-year decline in 25 years.
However, it wasn’t all doom and gloom. Retailers that
adapted to changing consumer behaviours, and focused on resilient locations,
proved there is room for growth in the retail sector (as we explore in our Retail
With changes comes
Greggs, arguably the retailer of the year for 2019, performed
incredibly well. A combination of revised branding, refurbishment of stores,
and most importantly a change of menu, have resulted in the transformation of
the bakery chain. Greggs’ ability to adapt to evolving consumer trends and
needs, such as healthy eating and veganism, has helped drive sales growth of 13.5%
for the year to December 29 (including +9.2% like-for-like sales at company
managed branches). The publicity surrounding the release of their vegan sausage
roll demonstrates the importance of this area for future growth in the food &
beverage (F&B) sector.
Physical store expansion in the F&B market will be helped
by a number of street food operators who are now taking permanent residencies (such
as Smokestack and Thunderbird Fried Chicken who both began in Dinerama).
Companies such as Kerbfood also offer incubator programmes, providing advice
and financing for street food operators looking to expand their business.
Lidl and Aldi
continue to grow market share
Another solid performance from discounters Aldi and Lidl saw
7.9% (4 weeks to 24 December 2019) and 11% (4 weeks to 29 December 2019) total
sales growth respectively. Despite these positive figures, if new store
openings were stripped-out, it is likely that like-for-like figures would not
be quite so impressive, providing some respite for the 'big four'.
The UK’s biggest supermarkets had mixed results. Tesco
announced a 'strong performance in a subdued market', in reference to the 0.2%
like-for-like growth in the 19-weeks to 4 January 2020: stark reflection of
general market expectations. With Sainsbury and Morrisons reporting falls of
0.7% and 1.7% respectively for similar periods, we expect the structure of the
UK grocery market to continue shifting towards the discounters in 2020, owing
particularly to Aldi and Lidl’s aggressive expansion plans.
No market for
Based purely on percentages, outdoor clothing retailer Mountain
Warehouse won Christmas (at least for those with a physical retail presence). Like-for-like
sales grew 16.2% in the 13 weeks to 29 December 2019 as the retailer
capitalised on the growing consumer trend for experiences over items. Fortnum
& Mason (+13%), Hotel Chocolat (+11%) and Naked Wines (+11%) were the other
retailers to see double-digit like-for-like growth in their respective
Christmas trading periods. These highlight consumer willingness to spend more
on the right items, reflecting polarisation across retail as value and luxury
And this pattern was clear for some of the worst performers:
mid-market fashion. A number of these retailers, including Superdry (-15.8%),
Quiz (-9.3%) and Joules (-4.5%), saw substantial falls in like-for-like
performance, reflecting the continued need for rationalisation of store
portfolios in this part of the sector.
There is simply too much retail space in this category, and
with clothing online penetration expected to be over 40% by 2023 (Forrester,
2019), optimising store portfolios will increase in importance.