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To general relief the majority of shoppers shrugged off the gloom, ignored the recession and shopped enthusiastically over the Christmas and holiday period. However the year-on-year comparisons were in the main soft and the disappearance of some well-known retail brands over the past year undoubtedly helped those still standing. January was a stark contrast. The BRC rated it the worst start in fifteen years, with snow, higher VAT and increasingly anxiety about the coming months keeping shoppers away from stores.
Most recognise that 2010 will be another tough year, with tax increases and interest rate rises to come – though in the electronics sector the World Cup and the ongoing digital roll-out will soften the impact.
John Lewis was clearly one of the real winners in the seasonal stakes with like-for-like growth in December and January of 10%, with ‘electricals and home technology’ up by around 7%.
Over the half-year (to 30 January), total sales increased by 10%, with electrics up by 8%, though both those figures include the benefit of new stores in Leicester, Cardiff and Poole. Online sales grew by 36%. In the six months just two stores – Watford and Aberdeen – failed to match last year’s figures. Four (Bluewater, Trafford, Cambridge and Peter Jones in London) achieved double-figure growth. A second ‘at home’ store will open in Croydon in the autumn.
John Lewis enjoys a large middle-class following which has benefitted from lower interest rates and reduced mortgage payments. In contrast, Argos blamed poor Christmas sales on the fact that working class families are feeling the pinch. Like-for-like sales in the eighteen weeks to 2 January rose by just 0.1%, as demand for TVs, computers and toys was offset by weak sales of games consoles and jewellery.
Transformed
At DSGi, the much vaunted Renewal & Transformation plan is delivering the forecast benefits. For the twelve weeks to 9 January like-for-like sales of electricals in UK and Ireland (that’s Currys, Currys.digital and Dixons Tax Free) increased by 8%. However, PC World’s like-for-likes fell by 3%, with sales held back by the continuing weakness of the B2B market. Gross margins across the Group were down 0.8% year on year, partly due to its decision to drive volume through the peak period. Megastores and 2-in-1 stores traded particularly strongly, as product availability improved.
John Browett, chief executive, is pleased with progress but cautions: "Looking forward, we expect 2010 to be tough across Europe and notably in the UK given the economic environment."
Over at Comet, the comparatives were more challenging – the 2008/9 season had seen DSGi’s sales fall by 12%, whereas Comet limited the damage to a 2% decline. This time, in the ten weeks to 8 January Comet’s like-for-likes fell by 4%. Across the group web generated sales increased by 19%.
BrightHouse, the rent-to-own chain that operates in the sub-prime sector, saw like-for-likes up by 9% in the final quarter of the calendar year. In contrast, sales at computer entertainment specialist Game slumped by 17% in the five weeks to 9 January.
Coming soon
So now the spotlight turns to the long-awaited arrival of Best Buy which will shortly open its first UK stores in Southampton, Thurrock and Merry Hill. I say shortly, as there are still no firm dates, with the company sticking to “spring 2010”.
DSGi will be less fearful about the prospect of a major new competitor after a decent performance over the key season and Thierry Falque-Pierrotin, chief executive of the Kesa group, is not overly concerned about the potential threat either: “I don’t think in the short term they will make a revolution in the market. In the UK we’ve had a very competitive electricals industry. In terms of square meterage the market is well covered. There’s a good mix between discounting and service. Finding their way will not be easy.”
Maybe so, but Best Buy has signalled its long-term intent with plans to create a thousand jobs as it expands its Geek Squad customer support service. It sees “huge potential for growth in consumer technology support over the next five years”.
