Christmas sales boost contradicted

The plethora of good results from the UK retail sector over the Christmas period may not be as good as the figures suggest.

Verdict Research said firms had gained £14bn of extra trade that would have gone to rivals if they had not gone out of business over the past year.

It pointed out that companies such as Woolworths, Zavvi, Principles, and Bay Trading are no longer trading.

Verdict said retailers also benefited from more buying ahead of the VAT rise.

With VAT returning to 17.5% from the temporary 15% on 1 January, it said this gave retailers a one-off lift.

Verdict’s comments come after the British Retail Consortium (BRC) said the UK High Street saw its biggest rise in December trading for eight years.(see the previous blog)

The RBC estimated that like-for-like sales rose 4.2%.

Verdict retail analyst Matthew Piner said: “Big, high-profile collapses such as Woolworths have had all the coverage, but the relentless closure of small stores has done just as much to push up vacancy rates.

“This has freed up extra sales which have been absorbed by the bigger stronger players, lifting their sales.”

Verdict points to other one-off factors behind December’s strong retail showing.

These include the cold weather boosting sales of warm clothing, food price inflation lifting the results of the supermarkets, and less discounting meaning consumers having to pay more.

Looking ahead, Verdict predicts that 2010 will be “tough” on the High Street.

“The extra spend freed up for survivors by casualties is a one-off gain, and we do not predict that there will be as many casualties in 2010 – most of the weakest have already collapsed,” said Verdict’s lead retail analyst Maureen Hinton.

She added that consumers are also concerned about higher taxes and continuing job insecurity.

As a result, Verdict predicts that consumer spending will only grow 1.1% this year, the second lowest rate of growth, after 2009, since its records began in 1966.

You have been warned!

Tony Heywood – Gilcrest Services Ltd
Retail Troubleshooter
Business Turnaround and Recovery

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