Mintel’s Month in Retail highlights the stories that have made headlines in the European retail markets over the past four weeks, with exclusive analysis from Mintel’s expert retail team on potential implications.

UK: Retail sales up 7.1% in December

Retail sales in December rose by 7.1% year-on-year according to the ONS. This followed a 5.9% lift in the previous month of November. Food sales in December increased 3.9%, with the large grocers returning to growth of 2.6%.

Non-food sales increased 5.7% during December. Clothing retailers increased marginally by 0.8%, health and beauty retailers by 10.0%, book retailers by 8.7% while electrical retailers declined 5.2%. The ONS said some smaller retailers performed particularly well, such as butchers.

“The numbers for December from the ONS and the BRC show significant differences: the BRC has total growth at 1.7% whilst the ONS says growth was much higher at 7.1%. One reason is that in 2015 the ONS came out with numbers which were very much lower than the BRC. It may also be that the BRC underestimates the scale of online, as the “mail order” sector, which includes the online-only retailers, saw sales rise by 30% in December.

However, these numbers do tie in better with some excellent trading figures from some of the market leaders, notably M&S. They also make sense in the context of consumer confidence which also remains very strong. But Mintel’s research for the forthcoming Electrical Goods Retailing – UK – February, 2017 report shows that many people are aware that prices will rise in 2017 and that they have been buying ahead of those increases.

So perhaps there is something of a frenetic top of the boom reaction to this Christmas. 2017 is to be more difficult and there is a sense people have reacted to this and decided to have a good time while they can afford it.”


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UK: Tesco and Marks & Spencer among the Christmas winners

Tesco group like-for-like sales in the six weeks to 7 January rose 0.3%, with UK sales growth of 0.7%. This was driven by a 1.3% rise in like-for-like food sales, a 4.3% increase in clothing and a 8.5% lift in toys.

Marks & Spencer (M&S) UK sales for the 13 week period to 31 December increased 4.5% in total and 1.3% on a like-for-like basis. This was driven by a 5.6% increase in food sales (0.6% LFL) and a 3.1% increase in sales of clothing & home (2.3% LFL).

“Excellent numbers at Tesco, but very much in line with what we’ve come to expect. For M&S, this is an above average performance in clothing for the first time in 6 years. There are a couple of important underlying factors here including the fact that demand held up well over Christmas. Looking at the major players, all have mostly done better than expected.”

“Additionally, there is a determined effort to pull back from discounting. M&S did not take part in Black Friday; Tesco says that it cut back on promotional activity; and so did Debenhams. What we are seeing is that retailers are trying to re-establish trust in their pricing. And this attempt is driving sales growth in a way that suggests that price cutting was actually undermining their business.”


UK: Fat Face reaps the rewards of full-price stance

Fat Face introduced its “Price Promise” in November 2016, guaranteeing it would not discount products prior to its winter sale which started on Boxing Day. The retailer’s stance against pre-Christmas discounting delivered 7.9% growth on full-price sales for the 54 days to 24 December 2016. The retailer reported a record week of full-price sales in the week to Christmas Eve, resulting in 22% less sale inventory than in 2015.

“Several clothing retailers have seen a strong performance over the Christmas trading period as a direct result of a more focused promotional strategy. Fat Face was among a select few retailers who chose not to discount pre-Christmas, with its sales starting on Boxing Day. Consequently the group saw full-price sales grow 7.9% for the 54 days to 24 December 2016 compared with the previous year. Through this strategy, Fat Face has helped increase trust in the brand and in its pricing.”


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UK: Burberry UK retail sales surge 40%

Burberry retail sales grew 4% to £735m in the three months to 31 December 2016, on the back of an “exceptional” performance in the UK, improvement in France and a return to growth in Asia Pacific. The brand was strengthened after its festive film received over 22 million views, while there was strong demand for new collection pieces.

The UK continued to outperform other markets, delivering a 40% rise in comparable sales due to growth among both travelling luxury customers from all regions and domestic shoppers.

“These are promising results from Burberry which suggest the group’s move towards a ‘see now, buy now’ model has resonated with consumers. The brand has used various digital campaigns in Asia to offset slowing luxury consumption amongst Chinese shoppers and the continued move towards wholesale reduction will further strengthen the brand in the future.”

“The brand is also emphasising its heritage through its Christmas campaign and Maker House pop-up that aligned with the brand’s September runway collection. These are well-considered and well-timed moves given the increasing appetite for British-made clothing in its domestic market. Mintel’s Clothing Retailing UK 2016 report shows that nearly 9 in 10 consumers would be interested in buying clothes made in Britain.”


UK: Shop Direct’s 9% sales growth driven by Very

Sales at Shop Direct rose 9% year-on-year during the seven weeks to 23 December 2016. Mobile sales accounted for 68% of the total, driven by a strong performance at Very.co.uk – with sales up 19% during the same period. Fashion was the standout category, with sales rising 16%. The athleisure trend boosted sales, as well with women’s sportswear alone up 83%.

“Online retailers stand out as one of the key winners in the fashion sector over the Christmas trading period. Shop Direct is seeing surging fashion sales driven by its Very brand. The company has successfully focused on getting the right merchandise alongside an innovative approach to retailing and is leading with initiatives such as a personalised online homepage. Mintel consumer research reveals that Very is the most trusted brand after M&S and Next, strongly associated with offering good value and being an accessible brand.”


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Germany: Metro Group gives a weak Christmas performance

Total group sales declined 0.6% during the first quarter to €17 billion, although like-for-like sales grew 0.1%.

Electronics business Media-Saturn reported flat sales, both in actual and like-for-like terms , as December sales were impacted by Black Friday purchases. Sales at the hypermarket chain Real continued to decline, falling 4% during the quarter compared to 3.9% decrease during the same period last year. Weak sales are attributed to ongoing store closures.

“The Media Saturn results indicate that Black Friday isn’t just an American and British phenomenon. Amazon is one of Media Saturn’s biggest competitors in Germany, so it is no surprise that the German electronics retailer has felt the need to participate in the additional discounting period. However, it would do better to focus on driving sales in ways Amazon can’t compete with, leveraging the power of its stores to offer a fast, convenient, experience-driven service for customers.”


Germany: Edeka withdraws complaint over Rewe’s Coop store acquisition

Edeka and Rewe have resolved the conflict over Rewe’s acquisition of 200 Coop stores, over which Edeka had previously lodged a complaint. The withdrawal of Edeka’s complaint coincides with Edeka and Rewe agreeing on the terms of their takeover of Kaiser’s Tenglemann.

“The dispute between Edeka and Rewe over the takeover of Kaiser’s Tengelmann has engulfed the German supermarket sector for the past two years. But with that issue finally reaching a resolution, it has paved the way for some periphery disputes to be laid to rest. The main sticking point for the Kaiser’s Tengelmann deal was the number of stores Edeka would acquire in and around Berlin. This takeover of Coop by Rewe gives the fourth largest grocery retailer improved coverage across the northern States to counterbalance the growth of Edeka.”


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