LONDON (MNI) -Last week’s blizzard of trading statements from major
UK retailers points to official UK December sales data coming in fairly
weak on the year as exceptionally cold weather undermined consumer
activity.

The retailers said the bad weather had impacted sales to some
extent and the groups which posted more robust numbers tended to be
those whose trading statement covered a longer period which help to
temper the impact of the “big freeze”.

The UK’s largest supermarket group Tesco saw weak sales growth in
the six weeks through January 8 as consumers stayed at home due to
exceptionally severe winter weather conditions, according to an interim
trading statement.

Like-for-like UK sales increased just 0.6% on the year over that
period. Electrical goods retailer Dixons Retail also issued a trading
statement Thursday, for the 12 weeks to January 8, which showed total
group sales down 1% and like-for-like sales down 2% on the year.

Dixons said UK operations had performed well although the bad
weather had reduced sales by an estimated 2%.

“Our performance remains solid but was hindered in the run up to
the important Christmas trading period in the UK by the disruptive
effects of the severe winter weather condition,” Tesco Chief Executive
Terry Leahy said.

John Browett, Dixons Group Chief Executive, said “Peak trading has
been solid in a tough market. The adverse weather conditions reduced
footfall in the run up to Christmas Day.”

The Dixons and Tesco announcements followed a raft of other interim
statements from big players in the retail sector which give an early
indication of how the exceptionally cold pre-christmas weather affected
retail sales and the wider UK economy.

The Tesco data cover the six weeks in the run up to Christmas
whereas the other supermarkets published data for a longer 13/14 week
period which appears to have helped plaster-over the effects of the cold
weather on sales.

Earlier this week, major UK retailer J Sainsbury said its total
sales rose 7.5% in the 14 weeks through January 8 and like-for-like
sales grew 5.4% on the year.

National Statistics December data will cover the 5 week period from
November 28 to January 1 and it takes an average week for the period.

That makes the John Lewis, Tesco and Morrisons pre-Christmas
trading statements decent proxies but one note of caution is Tesco said
it had been hit harder than some competitors by the bad weather because
it has more out of town stores.

Supermarket group Morrisons said that sales saw a slight increase
in the six weeks to January 2.

In the six weeks to 2 January total sales excluding fuel were up by
3.1% (4.7% including fuel). Like for like sales grew by 1.0% (4.0%
including fuel), the statement said.

Morrisons said that 2011 will be a challenging year with
disposable income coming under increasing pressure.

Department store group John Lewis bucked the trend. John Lewis saw
strong growth through the Christmas period, with like-for-like sales
rising 7.6% in the five weeks to January 1 and total sales up 8.9%,
according to the company’s latest trading statement.

Compared with two years ago total sales were 26.2% up whilst
like-for-like sales grew by 21.7%, according to the John Lewis figures.
While the department store group has seen robust growth, other UK
retailers have struggled.

Upmarket UK retailer Marks and Spencer said that its total sales
rose 4.0% in the 13 weeks through January 1 2011 and reported
like-for-like sales grew 2.8%.

The retailer estimates that the exceptionally cold pre-christmas
weather reduced food sales by 1% and general merchandise sales by 3%.

Marks and Spencer also said that it expects tough trading
conditions in 2011.

Debenhams, one of the UK’s leading department store groups, also
released an interim statement which showed like-for-like sales for the
19 weeks to January 2011 increased by 0.3% including VAT and decreased
by 1.3% excluding VAT.

Rob Templeman, Chief Executive of Debenhams, said “Looking forward,
we are cautious about the robustness of consumer sentiment for the
remainder of the financial year.”

UK clothing retail company Next also published its new year trading
statement which said that its sales were “significantly affected” by
extreme weather, with instore sales falling 6.1% in the last five months
of the year on a year ago.

The retailer’s mail order catalogue tempered the effects of the
fall in instore sales with the company seeing sales rise 0.2% on a
like-for-like year-on-year basis for the trading period August 1 through
December 24, according to its trading statement.

Music and DVD retailer HMV also released a trading statement and
said its sales in the UK and Ireland fell 13.6% on like-for-like basis
in the five weeks through January 1.

Both Next and HMV said poor weather and a softening in consumer
spending contributed to poor sales during this period.

In its trading statement HMV said:

“The challenging entertainment markets, combined with the severe
weather over our peak trading period have had a negative impact on our
trading year to date. In addition, there are well-reported consumer
headwinds as we enter 2011.”

Next also said that it may have to increase prices by around 8%
during 2011, due to rises in input costs and the recent hike in VAT,
suggesting that the clothing sector will continue to put upward pressure
on the UK’s CPI rate.

There has been greater uncertainty than usual over how the UK’s
retail sales in the Christmas and New Year period have panned out, with
heavy pre-Christmas snowfall and the Value Added Tax hike looming.

Analysts’ median forecast in a Market News survey was for a 0.3%
fall on the month in retail sales volumes, giving a 1.1% rise on the
year. Excluding auto fuel, the forecast is for flat sales on the month
and a 1.5% rise on the year.

–London newsroom: 4420 7862 7492 e:mail ukeditorial@marketnews.com

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