UK retailers report mixed peak season sales amid complex outlook

In the UK, retailers have seen mixed fortunes in 2021. Despite facing fewer pandemic lockdowns and trading restrictions than in 2020, high street and online retailers have instead been hit with supply chain challenges, supply constraints, inflation and, just in time for peak season, the spread of the Omicron variant. As Q4 sales data is released, the volatile trading conditions are evident in retailers’ varied performance.

There have been successes. This includes high street retail Marks & Spencer, which announced sales of £3.3bn in the peak quarter, up 18.5% year-on-year. The sales were also higher, by 8.6%, when compared with pre-pandemic sales in Q4 2019. While online sales are important in its mix, M&S stated its e-commerce sales “supported” rather than lead the growth. Instead, it was in the Clothing & Home line, and particularly in Food where sales rose 10% to a record high, that pushed M&S forwards.  

Similar levels of sales growth were reported at homewares retailer Dunelm, which announced a 13% annual rise in sales in Q4 2021. It also stated that revenue in H2 2021 was 11% higher than the same period in 2020 but some 36% higher than in pre-pandemic 2019 over the same period. The company’s online sales channel now accounts for one-third of all transactions, which is double the level pre-pandemic.

Both M&S and Dunelm have latched onto some upsides of changing consumer demand following the pandemic. The wave of Covid-19 variant Omicron in the lead up to Christmas across the UK saw more people enjoying stay-at-home activities, boosting food sales for M&S. This also helped supermarket chain Sainsbury’s, where grocery sales were up 6.8% in Q4 2021 compared to sales in 2019. Dunelm, meanwhile, is one of several UK furniture and DIY retailers seeing strong growth as consumers upgrade their homes.

Not all retailers saw the upsides though, even if they same headline figures in the same ballpark. Online pure-play retailer ASOS, for example, described demand over the final four months of 2021 as “volatile”. Sales rose 5% year-on-year, but a combination of supply chain congestion, higher freight rates and price reductions to clear inventory all contributed to lower gross margins by 400 basis points. Peak season performance summed up a year of mixed fortunes. In 2021, ASOS says sales growth is between 10-15%, but its profit outlook was downgraded to £110-140m in October when the company announced supply chain pressures would contribute to an expected 40% fall in profitability year-on-year.   

It is, though, the ASOS numbers that tell us the most about the reality of UK retail heading into 2022. Data from the British Retail Consortium shows retail sales are slowing. In December 2021, sales rose 2.1% year-on-year, markedly slower than the 9.9% average for the year. Moreover, even in announcing positive trading figures, Sainsbury’s CEO Simon Roberts said “there are still significant challenges in many areas” while Nick Williamson, Dunelm’s chief executive, pointed “there are several macro uncertainties to be navigated.” For the moment at least, UK consumer demand remains fairly healthy, but the mix of supply chain congestion, inflation, high freight rates and pandemic uncertainty is likely to remain for many months yet.

Source: Transport Intelligence, 13th January 2021

Author: Nick Bailey