We take a look at how the year has started for a number of retail and food brands, how spending has changed and how the consumer mindset has developed.
Which brands are doing well in the current climate?
We’ve seen a real mix of brands performing well in bricks and mortar. From Monsoon which has announced plans to open new retail stores with its founder Peter Simon back at the helm to M&S which had clothing and home sales up by 8.6% YoY in the 13 weeks to December.
Dunelm was up 18% on the same period in 2021. Hotel Chocolat had its best Christmas sales since it was founded nearly 20 years ago with 60% of sales in-store. Aspinal of London saw store sales rise by 40% overall and by 90% at its Royal Exchange site.
The supermarkets had strong Christmases, albeit driven by food price inflation and we saw the discounters – Aldi and Lidl – moving further into the centre ground, acquiring new customers, with Aldi reporting sales up 21% YoY. Looking beyond the UK, Whole Foods has recently opened a new Wall Street store after a multimillion-dollar renovation. In New Jersey, Babies R Us is poised to open a flagship at the American Dream Mall this summer.
Physical store sales are up and online growth is slow – is this a blip or a trend?
In spite of Royal Mail strikes in the UK, The Perfume Shop saw its best Christmas trading in its 30-year history. They reported ecommerce sales up 26% on December 2021.
Hotel Chocolat saw a healthy 40% of sales come through its website. Founder Angus Thirlwell is right to highlight the “sense of discovery and excitement” people feel when they step into one of their stores, but online remains a significant sales channel for the brand which started as a catalogue in the 1980s.
Boohoo CEO John Lyttle sees their 11% fall in sales in the four months to the end of December; as the normalisation of the channel shift online that came about as a result of the pandemic. With stores not fully open to customers, it’s perhaps not surprising that online-only brands with non-specific product ranges are seeing a flattening.
Is there a fundamental consumer shift to lower priced goods?
We’ve touched on the transformation of discount grocers Aldi and Lidl into mainstream players. This does seem to represent a fundamental shift insofar as both businesses are steadily growing market share to the extent that Aldi displaced Morrisons as the fourth largest in the UK in 2022.
We’re seeing strong sales from bakery chain Greggs which posted like-for-like sales of 18.2% in Q4, including Christmas, with a strong demand for seasonal products. Greggs now starts 2023 in position to invest in shops and supply chain capacity. It’s interesting to see Pret acknowledging the strength of Gregg’s proposition in fresh and hot food and drink to go with its newly launched ‘Made Simple’ £2.99 range.
Fast fashion clothing retailer Primark, which has collaborated with Greggs, has reported sales up by 15% to £3.1bn in the 16 week to January 17th. With Financial Director John Bason crediting their decision to maintain low prices and invest in “fun and modern” store environments that created irresistible hype for their customers.
General discounter B&M has upgraded its performance after a strong December. Sales in the 13 weeks to December 24th up 12.3% to £1.57bn and rising UK sales of 10.4%. Same-store sales in the UK, which strip out the impact of new store openings, rose 6.4%.
Are any mid-market and premium brands holding their own?
Majestic Wine had its second busiest Christmas trading in its 43-year history, narrowly behind 2021. Sales in December jumped by 21% compared with pre-Covid levels despite heavy promotional activity by the supermarkets. December 23rd was the busiest trading day in the wine merchant’s history and January has proved more damp than dry so far. A recent Times interview with CEO John Colley posits three reasons why Majestic is ‘different enough to survive’. A different product that’s unavailable elsewhere because of their buying strategy, a solid understanding of their customers’ preferences and well-trained staff who are either qualified in wine or in training to become experts.
In apparel, Mike Fraser’s Flannels group has announced more store openings for 2023. Further to the reopening of their seven-storey Liverpool site which offers services such as Botox and classes by Barry’s Bootcamp alongside clothing ranges chosen with a laser focus on its Gen Z customer base. The brand is betting on young people with well-paid jobs for whom looking good online and IRL is a priority. Crucially, this customer segment is still living in the family home, meaning minimal overheads and a generous disposable income.
Mid-market, perennial top performer Next has boosted its profit guidance based on store sales which increased 7.5% against weaker previous year figures.
We see sales growing at the value end of the market, but also for mid-market and luxury players. It’s less about wholesale shifts to cheaper products. The brands that are performing well know their customer and what they want in terms of goods and style of service. As ever in retail, it’s a command of detail that’s going to make brands different enough to survive and thrive.
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