A PROFIT warning from Thorntons and evidence from bellwether John Lewis that Black Friday has distorted Christmas trade rocked the high street yesterday.
Shares in chocolate maker Thorntons plunged after it said its earnings will fall this year amid reduced demand from some supermarkets in the key festive trading period.
The retailer, which has 249 stores, has also experienced short-term problems at its centralised warehouse in Derbyshire which opened in the autumn, resulting in lost and late sales.
It said: “The performance in the grocers has been mixed with good growth in several of our major partners yet significant volume decline in some others where prior year sales of high-volume lines have not been repeated.”
Thorntons has relied on more sales through its commercial channels such as supermarkets as it comes to the end of a three-year turnaround plan that has seen it close dozens of its own stores.
In October it told the market that it expected to meet full-year pre-tax profits forecasts of £9.65 million for the year to June, up almost a third from its last financial year.
However, it now expects profits for the current period will fail to grow after a “significant reduction” in previously indicated orders from major grocers who also took in stock later than anticipated.
Meanwhile, John Lewis confirmed what many analysts had suspected as it posted a rare year-on-year drop in sales for the week to 20 December and blamed the effect of Black Friday.
The American concept of a bumper sales day at the end of November took off in the UK this year and had a marked effect on early Christmas sales figures, but there were suspicions that consumers had simply moved forward their purchases. The department store chain said “the year-on-year comparison at minus 2.4 per cent reflects the changing shape of Christmas trade with an early peak at the end of November”.
Last week’s sales total of £160.6m was up 6.5 per cent against the previous seven days and John Lewis said customers appeared to be leaving their Christmas shopping “right up until the last minute”.
Andrew Murphy, retail director at John Lewis, said: “Last week we said it’s all to play for and that is still absolutely the case as we have seen a building trend of customers leaving their gift purchases right up until the last minute.
“It’s only in these final pre-Christmas days that many customers are finally moving to complete their gift buying and other purchases.” But retail analyst Nick Bubb pointed out that last week’s sales compared to £179m notched up by John Lewis in the final week of November.
He said: “As we suspected, last week saw momentum dip, with electricals trade still impacted by the Black Friday spending spike.”
Howard Archer, chief UK economist at IHS Global Insight, said John Lewis sales’ patterns indicate consumers have been strongly orientated towards looking for bargains this Christmas.
“It is very possible that Christmas shopping will end up being pretty strong overall this year, but it will be interesting to see to what extent the discounting and promotions have hit retailers’ margins,” he said.
SUBSCRIBE TO THE SCOTSMAN’S BUSINESS BRIEFING