Interactive Investor

How these high street retailers fared over Christmas

21st January 2021 16:02

Graeme Evans from interactive investor

Next and WH Smith’s share prices rose, but Superdry did not fare so well.

Next (LSE:NXT) and WH Smith (LSE:SMWH) have emerged as big share price winners after January's run of festive trading updates showed the retail sector fighting hard against multiple storms.

The majority of retail stocks have risen since 1 December, with notable exceptions being clothing brands Superdry (LSE:SDRY), QUIZ (LSE:QUIZ) and Sosandar (LSE:SOS) after losing up to a fifth of their values.

Supermarkets performed particularly well as the closure of restaurants and pubs triggered a record month of spending on take-home food and drink. Sainsbury (LSE:SBRY), which lifted its guidance on the back of seasonal like-for-like sales growth of 9.3%, got the biggest stock market response as shares rose 15%. Tesco (LSE:TSCO) was 7% higher and Morrisons (LSE:MRW) gained 3%.

Many other retailers have been thankful in the pandemic for their earlier online investments, with Dixons Carphone (LSE:DC.) able to turn to innovations such as one-hour drive-thru Order and Collect and offer customers advice on products through its ShopLive service.

Despite facing store closures and disruption in December, the FTSE 250 company still reported 8% like-for-like sales growth in UK electricals. This included online growth of 121% as customers spent their money on large screen TVs and all kinds of computing and gaming equipment in order to stay entertained during the coronavirus restrictions.

Continuing store closures in England's latest lockdown have kept up the pressure on the company but Dixons Carphone shares are still 4% higher than early December.

Some of the retail industry’s share price resilience is due to relief at the UK’s Christmas Eve trade deal with the EU, although some of this post-Brexit improvement has been tempered by the prospect of supply chain disruption at ports.

Many share prices had already rocketed prior to the Christmas season, including those with a focus on home improvement or retailers with ‘essential’ trading status advantage.

B&Q and Screwfix owner Kingfisher (LSE:KGF) upgraded its profits guidance in January after a run of weekly UK sales growth above 20%, although its shares are down 4% since the start of December to reflect growth of 89% since mid-March and 25% across 2020.

Highly-regarded FTSE 250 stock Howden Joinery (LSE:HWDN), which recently upgraded its forecasts for the second time in as many months, is up 4% over recent weeks and 51% since March.

The performance of Next is particularly impressive as shares continue to make light of ongoing City pessimism. They are up 19% since 1 December, following better-than-expected Christmas trading and a forecast for a sharp rebound in profits in the next financial year.

Its online platform has been at the heart of this success, with Next keen to add more third-party brands to its operation through a potential deal to buy Topshop out of administration.

Next continues to hold its own against online upstarts ASOS (LSE:ASC) and Boohoo (LSE:BOO). The AIM-traded pair also reported strong sales figures over Christmas — and show up the decision of Primark owner Associated British Foods (LSE:ABF) not to have an online retail operation.

Its sales were down 30% in the 16 weeks to 2 January as the conglomerate predicted it will lose £1 billion in sales if the current lockdown means stores remain closed throughout February.

In-store sales of clothing and home products at Marks & Spencer (LSE:MKS) also slumped by 46.5% in the run-up to Christmas, but this was offset by strong online sales growth of 47.5%. A robust performance in food, with sales up 4.4% in December despite lower footfall in city centres and train stations, meant M&S shares are up 5% over recent weeks and 52% since March.

Superdry hasn't fared so well, having lost 38% of store trading days to coronavirus-related closures in the 11 weeks to 9 January. Shop revenues fell 52.1% as a result, with e-commerce growth of 13.2% not sufficient to make up the difference.

Reporting underlying losses of £10.8 million for the six months to 24 October, founder and chief executive Julian Dunkerton said the pandemic had brought substantial challenges but that he continued to have faith in the brand's “influencer-led” digital marketing strategy.

The pandemic also continues to have a significant impact on WH Smith, with travel store sales in December running at 36% of 2019 levels. The high street business saw a better-than-expected performance over Christmas, while overall the FTSE 250 retailer said it ended the year with a stronger cash position than originally forecast.

The shares jumped 10% yesterday and are 17.4% higher than the start of December, as well as 94% stronger than mid-March.