COMMENT
High Street Winners & Losers

By David Kuo (TMFDragon)
January 18, 2006

A common mantra amongst many shopkeepers at Yuletide is that "Christmas always happens -- mums and dads will always put toys under the tree!" But this year it was touch and go as to whether Christmas would indeed happen for Britain's high street retailers. In fact, shopkeepers were made to wait until the very last minute to see if Christmas sales would meet expectations.

As it turned out, grocers enjoyed buoyant sales over the festive period. Like-for-like sales growth of 5.7% at Tesco (LSE: TSCO) beat expectations, and Sainsbury (LSE: SBRY) reported its fourth consecutive quarterly sales rise. Even Wm Morrison (LSE: MRW), which has been struggling to integrate its recently-acquired Safeway chain, said underlying sales growth accelerated over the key Christmas period.

Food also proved to be a Christmas winner at Marks & Spencer (LSE: MKS). The recovering high street retailer said food sales grew 8%, with clothing sales notching up a 2% rise. Naturally, there were concerns that the revival at M&S may have unsettled rival Next (LSE: NXT), but this proved to be unfounded. Britain's third largest clothing retailer said a strong performance at Next Directory should help it beat profit estimates.

Sporting-goods retailer John David (LSE: JD.) also expects to beat market estimates after a sales decline in October was reversed. But its performance contrasts with rival JJB Sports (LSE: JJB), which sounded a profit warnings. Alarm bells were also ringing at HMV (LSE: HMV), which said underlying sales fell over Christmas, and Body Shop (LSE: BOS) reported below-par festive sales.

Meanwhile, Burberry (LSE: BRBY) posted disappointing wholesales revenues, and Clinton Cards (LSE: CC.) said sales fell over Christmas. Another retailer to disappoint was Alexon (LSE: AXN), which blamed a poor product offer for its Yuletide hangover. Boots (LSE: BOOT) reported a 0.7% drop in sales, but this was better than the 1.4% decline that was pencilled in for the chemist chain.

Demand for digital cameras saw shoppers zooming towards Jessops (LSE: JSP) this Christmas. The photographic specialist said like-for-like sales stood 9% higher in the five weeks to 1 January. In the meantime, it was Sony's hand-held PSP game consoles that boosted sales at Game Group (LSE: GMG). The electronic games retailers even managed to get its hands on extra supplies of the must-have games console in time for the Christmas rush.

But there was no sugar-rush for chocolate maker Thorntons (LSE: THT), which said sales fell 6%. Nor were shoppers beating a path to pick-and-mix merchant Woolworths (LSE: WLW). The serial disappointer said core like-for-like sales fell 0.8%, though it stressed that cost cutting should nudge profits towards the upper end of expectations. Elsewhere, Majestic Wine (LSE: MJW) was toasting a strong demand for champagne this Christmas, Matalan (LSE: MTN) was hit by markdowns in homeware, and the tills were ringing loudly at Carphone Warehouse (LSE: CPW).

So Christmas has again proved to be a godsend for some shopkeepers but less good for others. In fact, it proved to be a calamitous Christmas for Forminster (LSE: FORM), which was forced to call in the administrators at its Kookai fashion chain.

For many years, I have said that retailing is not rocket science. But in truth it can be much more taxing. At least with rocket science there are formulas and equations that can help. But with retailing, shopkeepers need to live by their wits -- often second-guessing what their customers may want. And if you are an investor in retailers, you need to second-guess the shopkeeper. For me, that's far too much guesswork, which, I guess, is why I don't like investing in retailers.

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