UK shopper confidence falters after Christmas splurge

By James Davey, Paul Sandle and Sarah Younger

LONDON (Reuters) – Shares in Britain’s Marks & Spencer (OTC:MAKSY) and different retailers fell on Thursday, with 2 billion kilos ($2.45 billion) wiped off the sector, as concern about ebbing shopper confidence and financial weak point overshadowed wholesome Christmas buying and selling.

Retailers, already going through weak shopper sentiment, are bracing for greater prices from April, when employer taxes and the minimal wage are set to rise.

The financial outlook has been clouded by a leap in Britain’s authorities borrowing prices in latest days that provides to strain on authorities funds and has prompted analyst warnings that additional tax rises may very well be wanted.

With inflation additionally forecast to tick up, retailers anticipate a tricky 12 months.

“There’s that cautious buyer confidence on the market,” M&S Chief Government Stuart Machin informed reporters, after asserting the group had delivered the best meals gross sales over the profitable Christmas interval on the UK excessive avenue.

M&S reported above-expectations development of 8.9% in meals gross sales and 1.9% in clothes, dwelling and sweetness gross sales, however the retailer’s shares fell 6.5%. Tesco (OTC:TSCDY), the nation’s largest grocery store group, posted a 4.1% rise in gross sales, whereas its shares traded down 1.3%.

“The 12 months forward will not be all clean crusing for the retail giants, because the sector gears as much as battle imminent tax hikes,” Hargreaves (LON:HRGV) Lansdown fairness analyst Matt Britzman mentioned.

Whereas these two retailers have been helped by booming grocery gross sales, different classes struggled.

Progress at food-on-the-go specialist Greggs (LON:GRG) slowed within the remaining months of 2024 and discounter B&M posted a fall in underlying gross sales of two.8%, sending the shares down by 10% and 12% respectively.

Whereas retailers fell, Britain’s globally centered blue-chip index traded greater at 0.5%.

CHALLENGES CONTINUE

Greggs Chief Government Roisin Currie mentioned customers have been cautious about spending.

“It has been a difficult second half in 2024. I feel it’s important to make some assumptions that that continues in 2025,” she informed Reuters.

Greggs had carried out nicely lately as its worth sausage rolls and steak bakes gained reputation, however its underlying gross sales development fell to 2.5% within the remaining quarter of 2024, down from 5% within the earlier interval.

Subsequent (LON:NXT), the UK’s largest clothes retailer by market capitalisation, on Tuesday warned gross sales development would gradual in its 2025/26 12 months because the influence of the federal government’s tax hike begins to hit employment ranges and lift costs.

Ken Murphy, the boss of Tesco, was extra sanguine.

Though customers who “actually celebrated over Christmas” could be extra value-focused in January, that was all the time the case at the start of the 12 months, he mentioned.

After the pandemic, a provide chain disaster, and excessive ranges of commodity and vitality inflation, Murphy mentioned Tesco, which is forecasting 250 million kilos of further prices from the employer tax hikes, was used to dealing with rising prices.

($1 = 0.8132 kilos)