We were right: Christmas retail sales up as consumer confidence continues on upward trend

Well, we were right. Figures from the ONS released today on Christmas retail sales match what we predicted back in November. It’s always rather gratifying to get a forecast right, especially when it’s for the right reasons. Consumer confidence has been on an upward trend, retail sales had been strong and the comparative in December was weak. There were still some surprises.

Food retailers were relatively weak, but we hadn’t expected inflation to fall so much in November and December. Clothing retailers are also weak, presumably reflecting the awful performance by the market leader, M&S. The best performing sector was the mixed good retailers, especially the department stores. They were also the strongest online sector – up 38%, even stronger than the internet pure players! such as amazon. In fact, given the pattern of pre-Christmas trading, we had expected a strong performance from them.

There’s no doubt that most commentators, including us, were spooked by the run of bad figures at the beginning of the results season – M&S, Tesco, Morrisons, Debenhams were all poor. And we had been surprised by the amount of discounting in the run up to Christmas, especially from the market leaders. But those who held their nerve prospered. It was a Christmas of extremes – retailers whose offer appealed to customers did very well, but those customers were not prepared to give the second rate a second thought.

So what about 2014? The prospects are good. It’s a pre election year, consumer confidence remains strong. Even the chancellor is trying to persuade employers to raise wages. It remains to be seen how successful he will be, but the one major negative remains the income squeeze. Inflation has been falling, but wages growth remains low and we feel that there must be some easing of the income squeeze for this rate of growth to be maintained.

Richard Perks is Director of Retail Research at Mintel. Richard leads on retail trends and analysis for Mintel and provides analysis to the national and trade press on retail and consumer issues. Richard joined Mintel in 1999 and previously headed the Retail team, overseeing the content and strategy of the retail reports. Before joining Mintel, he worked as a both a city analyst and as a journalist. Follow Richard on Twitter @RichardP_Mintel