M&S and Tesco: Is it Great Expectations for their Christmas 2014 retail sales?

January 6, 2015

With Tesco and M&S both about to announce the results of the Christmas sales period, Mintel’s European Retail Analyst, John Mercer, looks ahead at what to expect…

Tesco – Quarter 3

We expect to see a decline in like-for-like sales which is less severe than that in the second quarter (when sales were down 5.5% excluding petrol), despite this being in the context of a deflationary grocery market. We think Tesco’s Christmas performance will not be the worst of the Big Four. But nor will it be the best (we expect Asda to emerge as the Christmas winner among the Big Four.)

We think Tesco’s Christmas performance was helped by a clear focus on back-to-basics retailing: more staff in-store and sharper prices, notably on fresh produce. We expect this return to retailing fundamentals, and particularly sharper pricing, to continue in 2015, not least because this is how Aldi and Lidl have been chipping away at Tesco’s market share.

But it is much too early to see any real recovery – it takes a long time to turn a business round and to start attracting back customers who have moved elsewhere. While we think Christmas trading will be better than previous results, Tesco has a long, slow climb ahead. And expected further deflation in the grocery market in 2015 will make a swift turnaround in sales even harder.

Marks & Spencer – Quarter 3

As in previous periods, M&S is expected to be a story of two halves, with disappointing clothing sales and robust growth in food.

Clothing/general merchandise:

Our expectations for M&S clothing/general merchandise are very muted. Its general merchandise sales were down 2.9% like-for-like in the first half (to 27 September) and we have similar expectations for Q3, which covers the Christmas period.

Our view has been strengthened by three factors:

1) Prominent discounting by M&S, including a week of special offers leading up to Christmas Eve, suggests tepid demand.

2) M&S posted declining internet sales in recent reporting periods, following the relaunch of marksandspencer.com in early 2014, and any continuation of this negative trend will be a strong downward pressure on Christmas clothing/GM sales.

3) At the same time, this was clearly an ‘online Christmas’ for non-food retailers, with John Lewis reporting flat in-store sales and Next reporting near-flat (0.5%) store-based sales. So, if M&S has seen e-commerce revenues fall again (or even if it has seen weak positive growth online), there is likely to have been little store-based growth for it to have fallen back on.


In food, however, M&S is expected to have continued to outperform, tapping the demand for convenience shopping and an apparent pursuit of quality by grocery shoppers. Our expectations have been bolstered by the strong (7%) sales growth posted by premium rival Waitrose for the Christmas period. Food now comfortably contributes more than half of M&S revenues, so the difficulties in clothing should not be taken as indicative of the retailer as a whole: M&S has been one of the best performers in the food sector. We expect it to continue to be so.

John Mercer
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