Who Did and Didn't do Well Over Christmas (and Why)

In Retail Winners and Losers in 2014 I made some predictions as to who would do well, and less well, this year. How are these looking in the aftermath of the critical Christmas and New Year trading period?

Department stores John Lewis and House of Fraser have emerged as two of the biggest retail winners this Christmas, but the fact that John Lewis saw its sales growth halve and House of Fraser's success came after heavy discounting showed that there is still a chill in the air even for those who appear to be doing well. Who is wrapped up warm and who is catching a cold?

NEXT: Sales up 12% on last year for the period from 1 November to 24 December. Britain's second largest clothing retailer reported sales "significantly ahead of expectations" in the run up to Christmas. The Company raised its pre-tax profit forecast for 2013 to £684 - £700m and announced a special dividend of 50p per share. Shareholders showed their appreciation by sending the share value up 10%.

The retailer has cleverly benefited from a series of self-help measures that offset any impact of the heavy discounting and reduced footfall so bemoaned by struggling rivals. They have a consistent offer with good size availability and great delivery options. A retailer that is trusted on product, quality and its management of multi-channel (I won't give my views on the product itself, apart from observing that M&S used to stock this sort of merchandise in the days when it sold clothing well). Chief Executive Lord Wolfson said that they also saw a rise in shoppers leaving their on-line sales until the last minute as confidence grew in the next-day delivery service.

John Lewis: a 7% rise in like-for-like sales in the 5 weeks to 28 December. JL was boosted by a 22.6% increase in on-line sales bringing it to almost a third of total sales over this period, but sales in stores were also up by 1.2% as shoppers snapped up last minute presents on the high street.

Shoppers have a comfortable and welcoming environment and are served (in the main) by enthusiastic and well-informed assistants. I'd be interested to know the profit number year on year as clothing is now highly dominated by Brands who discounted from early December. I was also faced with waiting 10 working days to have 2 in stock items delivered. Why? I went to AO.com and had them delivered next day. John Lewis cannot trade on reputation alone. From now on the customer must be King and established supply chains must develop or adapt or the story may well be different next Christmas. (Still think the advert was worth the cost?)

House of Fraser: Like-for-like sales for the 3 weeks to 28 December were up 7.3% with on-line sales up 57.7%. Apparently this surge in on-line sales helped HoF to have its best ever Christmas trading period, although having used the website I have to say I am amazed at this!

The store environments have improved (unlike Debenhams) and if only they did not discount so often I'm sure that more aspirational brands would stay with them. My view would be "decide who you are and stick with it". Prestigious brands do not need to discount and currently being in House of Fraser is not seen as a good option to sell through.

Debenhams: Underlying sales rose by 0.1% in the 17 weeks to 28 December despite a 27% rise in sales on-line. Gross profit margin fell by up to 1%.

We were warned that pre-tax first half profits would be 26% down on last year at £85m after hopes for a late surge in December were dashed.

My prediction last October was that Debenhams would fail in 2014 and if their current strategy of discounting continues then Debenhams will not survive as there is no point to it any more. This strategy always had a limited shelf-life and they are now neither mid-market or value.

Very odd that the CFO was chosen to fall on the proverbial sword. That seems more than unfair when a change of strategy led from the top is surely the only way forwards, although perhaps the CFO was behind the (grasping at straws) tactic of demanding that its suppliers pay a 2.5% discount just 8 days before Christmas.

It seems it's been good news for all those clothing brands with great, distinctive product who held their nerve on discounting. Next, Fat Face, Boux Avenue, JLP own brand, Zara, Reiss, Jigsaw, and Ted Baker.

Retailers can't directly affect confidence in the economy but if you have a great product and manage stock well then you are much more in charge of your own destiny. Those that really understand their customers and put their needs first will win in 2014.

Written by Erica Vilkauls: Director JEM Retail Consultants

It's The Most Wonderful Time of the Year - To be in Advertising!

What does Christmas mean to you? Kids jingle belling and everyone telling you "Be of good cheer" or a bonanza for advertising companies promoting images of size zero models in skimpy underwear, impossibly attractive men posing as Aladdin and cartoon animals exchanging presents in the snow?

According to market analysts at Neilson, retailers will throw off the cloak of austerity by spending £390m on advertising over the last three months of 2013. John Lewis launched its campaign on Saturday night, paying £750,000 to take over an entire ad break during the X Factor. Apparently a single ad slot for the final will cost £180,000 despite steadily falling viewing figures indicating that the adverts are probably more entertaining.

Much of the discussion in the press is about the spending on TV advertising going up year on year and a move to social media to engage the consumer. The John Lewis offering, for example, was much anticipated by unbranded ads fuelling Twitter traffic under the hashtag #sleepingbear. But will the sight of Rosie Huntington-Whiteley prancing around in mashed up scenes from fairy tales (or the opportunity to name the Westie on Facebook) reverse 9 successive quarters of falling clothes sales for M&S?

"We think" says Steve Smith from Asda, "it's more important to invest money directly into lowering the prices of all our products instead of producing costly campaigns that just keep the ad guys happy". Of course this could just be sour grapes following last year's ill-judged campaign (more than 600 complaints to the advertising watchdog) but a recent online poll suggested that nearly two thirds of us agree and would rather see the big retailers giving money to charity than spending it in this way.

Having worked at the John Lewis Partnership I know they invest both money and partners' time doing all sorts of great things for community projects. Personally I would far rather see them use the money to do even more of this work than spend it on what looks remarkably like a remake of Watership Down with the strange addition of a bear. As great as the animation no doubt is the whole thing left me (and 68% of us according to another poll) strangely unmoved.

One important point to make here is the reliance on this quarter to make or break profits. In my "old school" merchandising training I was taught two things: spread your promotions over the year thereby reducing reliance on any one period; and don't mark down (people will just panic and buy late in the quarter). I see little evidence of good strategic planning and retailers holding their nerve.

An expensive TV advertising campaign is a poor substitute for a great product range and excellent customer service. Ironically this is another reason that the John Lewis campaign is lost on me: I would have shopped there anyway as they have products I want to buy, when I want to buy them. All the advert has done is to ensure that I will record anything I want to watch on ITV so that I can skip the very thing the retailers have spent so much money on.

So do you look forward to the seasonal tradition of the blockbuster adverts or would you agree that the whole thing has got out of control?

Bah, humbug!

Written by Erica Vilkauls: Director JEM Retail Consultants