U.K. Retail's Super Super Thursday Has a Downside

(Bloomberg Opinion) -- Super Thursday for British retailers – the equivalent of an Ironman Triathlon of holiday sales reporting – is here.

What have we learned so far?

Well, the holidays have not been as bad as feared. Though a nasty profit warning from Halfords Group Plc showed some chains were suffering from the terrible conditions Asos Plc mentioned in its pre-Christmas report, Britain's biggest retailers generally escaped taking a red pen to their full-year profit forecasts. Even beleaguered Debenhams Plc escaped a profit warning, despite its poor Christmas results.

But there wasn't much comment on margins in the any of the sales updates this month. That leaves scope for disappointment when the full reports come in.

The picture looks like it might be mixed. J Sainsbury Plc said it had held back from discounting at its Argos arm around Black Friday. That should be positive for margins. In contrast, those that cut prices aggressively, such as John Lewis Partnership's department store, will see a hit to profits.

At first glance, the picture from most of the listed retailers looks at odds with a report Thursday from the British Retail Consortium, which said that store groups suffered their worst December since 2008. Like-for-like retail sales fell 0.7 percent from December 2017.

U.K. Retail's Super Super Thursday Has a Downside

Some perspective is in order. Last month’s drop is nowhere near as severe as the collapse seen a decade earlier. And a BRC figure that includes newly opened stores showed sales were flat. Given the very difficult conditions in the run up to the holiday, particularly in non-food, that’s hardly a disastrous result.

Also, it's also worth noting that the BRC data are drawn primarily from its membership, the majority of which operate predominantly from physical stores. So it's possible that its report understates the contribution from online players, and that overall, December spending wasn’t as bad as all that.

U.K. Retail's Super Super Thursday Has a Downside

By the same token, it will be worth keeping a skeptical eye on the official retail sales data to be published next week by the U.K. Office for National Statistics. These figures tend to overstate the performance from small online retailers and so can present a picture that is too rosy.

The reality is that a happy Super Thursday shouldn't be taken as a prelude to a bounce-back in retail sales any time soon.

The uncertainty over Britain's exit from the European Union means consumers are likely to remain cautious. The timing isn’t great, given that January and February are usually lean months, as Christmas credit card bills land on doormats. Just as shoppers reined in spending in October and November after splurging in summer, expect a similar pattern over the next few weeks.

There is one wildcard. Retailers suffered a dismal February and March last year as Britain was battered by winter weather that was so bad it became known as the Beast from the East. If the U.K. escapes an arctic blast over the coming weeks, any pickup in sales should produce a very favorable comparison to 2018. So there is a way for shops to muddle through the Brexit turmoil. 

But if there is another dump of snow, the arrival of spring will be very bleak indeed.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Andrea Felsted is a Bloomberg Opinion columnist covering the consumer and retail industries. She previously worked at the Financial Times.

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