BRC-KPMG Retail Sales Monitor – December 2014: The impact of Black Friday on UK Retail Sales

The BRC reported its weakest level of growth for December since 2008 which, in our mind, confirms the distorting impact of Black Friday on the distribution of spending in the traditional Christmas sense. As we reported in our monthly Retail Sales Report (http://retaileconomics.co.uk/report-retail-sales) we suspected that some Christmas spending had been brought forward to take advantage of a new event on the retail calendar.

In that sense, December’s total sales of +1.0%, the weakest in six years, does not point towards a collapse in sales, but rather a distortion that will need to be accounted for in Christmas sales periods to come. In fact, if you take November and December together, sales growth was around 1.5% up on the same two month period of the previous year which makes trading that much better, especially if you considering the drag that food sales are having on the industry. This approach gives a much more rounded indication of performance for the Christmas period. So all in all, non-food sales are likely to have performed better than at first glance, however, any deep discounting would have eroded margins.

We look with interest at comments made by John Walden, CEO of Home Retail Group, who said that Black Friday had "significantly impacted the shape of Argos's sales over its peak trading period". We agree with his opinion that Black Friday is not going to go away and retailers will be working out ways to try to make the sales period more profitable. This is likely to involve being more selective over sales lines and balancing the activities that are more profitable with those that are not.

The impact on profits will become clearer in time, but our view is that although Black Friday bought hordes of people through the door and generated sales activity, it was detrimental to the bottom line. Compressing sales into a narrower period at deeply discounted levels can ultimately be negative for the industry as a whole.

Retailers’ strategies will evolve in 2015 to make the event more profitable but this new event on the retail calendar is here to stay along with its distorting impact on sales patterns.

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