Retailers eagerly await the Christmas period, as do the rest of us, hoping it will reward them with bountiful sales as people go gift-shopping for the festive season. The much-anticipated time of year proved strong for many of the U.K.’s biggest stores, including the Fortune 500 Europe-listed trio Tesco, Sainsbury’s, and Marks & Spencer.
In the supermarket category, sales were up 5%, 3.5%, and 6%, respectively, among Tesco, Sainsbury’s, and Lidl in the four weeks to Dec. 29 covering the Christmas holiday. The boom in spending was driven by average households making 17 shopping visits during the month, marking the busiest time since March 2020, according to market research firm Kantar.
This was the strongest December since the pandemic for Sainsbury’s and Asda, as their market shares increased. Meanwhile, Marks & Spencer’s food and drink business rose 8.7% in the last 12 weeks of the year.
Despite the rosy picture, grocery price inflation still determined people’s shopping choices. Discounters like Lidl and Aldi benefited from this as they had their best-ever Christmas sales activity.
Kantar’s figures are an important indicator of consumer appetite at the end of the year. They also hint at what 2025 might hold for retailers in the U.K.
Grocers might have had a strong December, but other stores in Britain have continued to feel the pangs of inflation and reluctant consumer spending. Overall sales during the so-called golden quarter—the last three months of the year—flatlined, according to figures from the British Retail Consortium.
Nonfood sales were down from the previous year, while food sales rose sluggishly at 1.7% compared with 6.3% last December.
“Following a challenging year marked by weak consumer confidence and difficult economic conditions, the crucial ‘golden quarter’ failed to give 2024 the send-off retailers were hoping for,” Helen Dickinson, BRC’s chief, said in a statement. In a report last week, she said footfall in the high street was lukewarm, resulting in a “drab December.”
She predicts slight growth in 2025, marred by fresh challenges linked to the Labour Party’s 2024 budget, which is set to increase retail costs by £7 billion.
Major stores have already flagged concerns heading into 2025. Next, one of the U.K.’s most prominent high street retailers reported a strong festive period, with expected profits amounting to just over £1 billion.
Still, Next said that the budgetary impact could force it to increase prices by 1% for consumers, which it said was “unwelcome” amid “unusually high” costs, totaling £67 million solely from wages. That’ll result in slower sales and profit growth this year.
Next is far from alone in its dilemma of balancing price increases amid new cost pressures. The British Chambers of Commerce found that most of the 5,000 companies it surveyed planned to hike prices in the coming three months.
“Retailers had pinned their hopes on a strong end to 2024, but the BRC’s figures suggest they didn’t get the desired Christmas present. The prospect of price hikes to offset higher costs suggests that the retail sector will remain in the doldrums as 2025 unfolds,” said Dan Coatsworth, investment analyst at AJ Bell.
