There was no white Christmas this year for most of us in the UK.
But we are guaranteed a blizzard in January — a blizzard of Christmas trading updates from FTSE retailers.
A stack of high street names will be reporting on how they fared in what variety goods chain B&M European Value Retail calls ‘the Golden Quarter’.
As ever, we can expect Christmas trading to have firmed up some companies’ confidence in their full-year guidance. And some to lower or raise their expectations.
Let’s have a look at what’s in store.
Selection box
The table below shows just a bellwether selection of the many retailers set to issue trading statements in January.
It includes the dates scheduled for their announcements and the performance of their shares over the last 12 months.
Given the FTSE 100 was up just 3.8% in 2023, and the mid-cap FTSE 250 only marginally higher at 4.4%, it’s no exaggeration to say that most retail stocks absolutely whopped the market.
In demand
The shares of FTSE food sellers generally did well. And I also note that privately owned discount supermarket chains Aldi and Lidl have both already (2 January) briefed the media that they enjoyed their ‘best ever’ Christmases.
The shares of FTSE retailers with a value focus were popular with investors through 2023. Primark owner Associated British Foods (+51%) and B&M (+43%) were notable big risers.
And despite the much-touted ‘cost of living crisis’, investors also piled money into mid-market retailers. Marks and Spencer (+121%) was an outstanding performer, and Next (+40%) was another that attracted strong support.
Out of favour
Investor enthusiasm for retail stocks didn’t extend to sellers of bigger-ticket items and luxury goods.
Currys, the computers, TVs, and kitchen appliances emporium, was one of the two companies in the above table whose shares fell last year. They were down 6%.
DFS Furniture, another seller of bigger-ticket household items, which will also likely issue a trading update in mid-January (it hasn’t confirmed a date), saw its shares slump 21% in 2023.
Luxury fashion house Burberry (-30%) was another casualty. It issued a profit warning in November, citing a “slowdown in luxury demand globally”.
Similarly, investors shunned high-end watches and jewellery retailer Watches of Switzerland (-14%). This one has a trading update pencilled-in for early February.
Common headwinds
Despite positive investor sentiment for food, value and mid-market retail stocks on the one hand, and negative sentiment for bigger-ticket and luxury merchants on the other, there are plenty of common headwinds across the entire retail sector.
In early November, B&M noted that “an uncertain and ever-changing economic background makes forecasting for the full year difficult”.
And M&S itemised a number of the factors in play that are beyond retailers’ control. Namely: “Impact on the consumer of the highest interest rates in 20 years, deflation, geopolitical events, and erratic weather.”
Hyperactivity
With heightened potential for Christmas tales of the unexpected — positive or negative — in January’s flurry of updates, it seems there may be more scope than usual for hyperbolic headline writers and excitable media commentators to ply their trades.
I’ve little doubt there’ll be big ups or downs in the share prices of at least some retailers on their update days. And that short-term traders will revel in their ‘expertise’ when they punt on the stocks that rise, and curse their ‘bad luck’ on those that fall.
Foolish investors
None of the January retail hullabaloo should be of too much concern to level-headed, long-term Foolish investors.
If you already own shares in a retailer, or are thinking of investing in one, its Christmas update may provide some useful new illumination or insight. But in the grand scheme of things, it’s no more than a further small step — forwards or backwards — in the journey of the company.
One short trading period alone will not define the long-term future of the business, or the success (or failure) of your investment.
