Christmas sales rise at Tesco and M&S, but Asos sales drop – business live

Key events

ASOS shares jump 13% as £300m cost-cutting plan announced

ASOS has also announced plans to cut over £300m in costs this year to boost its profitability, including cutting staff costs and closing three warehouses.

As well as announcing a 3% drop in revenue in September-to-December, ASOS says it has started a £300m package of “profit optimisation and cost mitigation measures”.

They will more than offset the hit from inflation, it says, and lead to a “modest improvement” in profitability this year.

The plan includes winding down three “ancillary storage facilities”, one in Europe, one in the UK and one in the US, rationalising office space, removing 35 unprofitable brands from ASOS’s platform and reducing staff costs by 10%.

In October, it announced 100 head office job cuts in a cost-saving move, as demand weakened in the cost of living crisis.

Shares in ASOS have jumped over 13% this morning, to 667p.

Shares in Tesco have dipped 1.2% in early trading, as the City digests its financial results.

M&S are down 1.3% (but still up almost 15% so far this year), after it also reiterated its profit guidance this morning and reported strong Christmas sales.

Chris Beckett, head of equity research at Quilter Cheviot, says:

“Just like Sainsbury’s yesterday, Tesco and M&S both delivered solid statements today, highlighting that the UK grocery market held up over the Christmas period, despite fears around the cost of living squeeze. However, when you dig into the detail, much of this increase in revenue has come about due to price rises, rather than rising volumes.

“That said, clearly customers were prepared to spend more money on food in the run up to Christmas. The worst case scenario with the UK consumer has not yet been realised as the cost of living squeeze has hit but not necessarily altered behaviour drastically. Whether or not this was people simply prioritising Christmas before tightening their belts will be a crucial question in future statements from the pair.

“Both retailers have reiterated their profit guidance, in part thanks to rising inflation, but this does also present a risk. Costs have gone up and this has eaten away at profits. Tesco and M&S have had to put wages up to attract and retain staff and as such this will have an impact on the bottom line.

“For M&S, it says it delivered its best clothing and home best numbers since 2015 and there are definitely signs of stabilisation after a difficult few years. It has also seen a success with its shift out of town centres and into out-of-town retail parks and we expect them to continue with this activity.

Labour shortages leaves Halford struggling to hire skilled technicians

The UK’s labour shortages mean Halfords has not been able to recruit enough skilled technicians at its Autocentres business.

This will hit higher margin sales during the important upcoming peak in demand for MOTs in the first quarter of this year, it says.

That’s one reason for Halfords cutting its profit guidance this morning, to between £50m and £60m (it previously expected to be at the lower end of a £65m-£75m range).

With “macro-economic headwinds” hitting the cycling and consumer tyre market, Halfords also warns that inflation will still hit consumers – so it doesn’t expect a significant short-term recovery in high ticket, discretionary spending.

Graham Stapleton, Halfords chief executive officer, says the firm has seen strong revenue growth through some “exceptionally challenging circumstances”. He insists the company is taking steps to find enough technicians, including trying to attract women and older workers.

With unprecedented demand in our Motoring Services business, we are particularly impacted by the nationwide skills shortage, with recruitment proving to be extremely challenging in the current labour market.

We are continuing to take a range of actions in order to fill 1,000 new automotive technician roles, which include our new Later Life Apprenticeship programme, as well as a focus on attracting more women and young people from disadvantaged backgrounds into automotive apprenticeships.

We are confident that we can offer unrivalled career progression for automotive technicians, and that this will allow us to attract and retain talented individuals, thereby enabling us to better service the demand through FY24.”

Marks & Spencer "achieves an impressive Golden Quarter"

Sales of turkeys and menswear helped Marks & Spencer to report impressive sales figures today, says Victoria Scholar, head of investment at interactive investor:

“Marks & Spencer reported like-for-like Christmas food sales up 6.3% while clothing and home sales grew by 8.6%, topping expectations.

International sales increased by 12.5% with a strong performance in the Middle East. In food, M&S achieved its highest ever market share while volumes through Ocado retail represented around 30% of the average basket on Ocado.com over Christmas.

However M&S warned that there are ‘clear macro-economic headwinds ahead and underlying cost pressures.’ However the retailer expects full-year results to meet November’s guidance.

Marks & Spencer achieved an impressive Golden Quarter with strong seasonal food sales such as of turkeys, in which it retained its leading market share for a third consecutive year. Meanwhile menswear has been a key tailwind for sales at M&S partly thanks to its partnership with the England squad during the football World Cup. It has also been working hard to become an omnichannel retailer, achieving around half of its growth through third party brands, supported by its App as well as click and collect orders.

After a difficult year for the shares, M&S has been picking up lately, rallying by more than 20% over the last month.”

Russ Mould, AJ Bell’s investment director, makes an important point about today’s Christmas trading results – sales growth is being lifted by rising prices.

Inflation is running at 10%, while food inflation is in double-digits, Mould points out on Radio 4’s Today programme, adding that:

So unless you’re running at 10 [% sales growth], you’re either losing a little bit of volume or maybe giving a little back on price and margin to keep your customers coming through the door.

Introduction: A flurry of Christmas trading statements

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

It’s Retail Super Thursday, when a raft of big-name UK retailers, including Tesco, Marks & Spencer, Asos and Halfords update the City on how they fared over Christmas.

And Tesco has reaffirmed its profit guidance for the current financial year; it still expects retail adjusted operating profits of between £2.4bn and £2.5bn.

Tesco says it is the only major grocer to increase its UK market share compared with pre-pandemic levels, with a 27.5% share of the market.

Sales in the UK and Republic of Ireland (ROI) over the Christmas period were 7.8% higher than a year ago. Over the 19 weeks to 7 January, like-for-like sales were 6.1% higher.

Ken Murphy, chief executive, says Tesco delivered a strong market share performance in the UK and ROI.

Murphy cautions that there are “challenging conditions ahead”, but says:

I’m extremely proud of the way Tesco has stepped forward to help customers dealing with tough times this Christmas.

By delivering relentlessly on the strategic priorities that we set out 18 months ago, we have made sure that customers know that they will benefit from great value and quality in every part of their basket, however they choose to shop with us.

Tesco points to its Aldi Price Match, which pegs 600 key products to prices at its discount rival, and Clubcard Prices which helped customers spend less on festive products.

Sales volumes on Tesco’s Low Everyday Prices range jumped by 7.4%, as customers looked for cheaper good in the cost-of-living crisis.

Across the high street, Marks & Spencer has declared a “strong Christmas trading performance”, with its food division achieving its highest ever recorded market share in the four-week festive period.

M&S’s like-for-like sales were up 7.2% in last 13 weeks of 2022, with food spending 6.3% higher and Clothing & Home sales up 8.6%.

M&S had its largest ever Christmas sales of over £80m on 23 December; supported by improved availability and strong demand for seasonal lines including turkeys.

Stuart Machin, M&S’s chief executive, says more customers shopped with M&S over the Christmas period than in recent years.

“M&S sustained trading momentum through the peak quarter and both Food and Clothing & Home have delivered strong growth.

M&S Food outperformed the market on volume and value in the critical four-week Christmas period for the second year running and reached its highest ever recorded market share. Clothing and Home delivered another outstanding performance, maintaining its market leadership position with its highest market share in seven years.

But ASOS had a tougher time, with UK sales down 8% in the last four months of 2022.

ASOS blames “weak consumer sentiment”, saying the economic and political disruption around the disastrous mini-budget in September hit demand. It also cites delivery disruption last month (when Royal Mail workers were on strike):

It says:

This was particularly significant in September, which was impacted by national newsflow, and December, which was affected by disruption in the delivery market.

Total revenues were down 3%, which ASOS says reflects “challenging trading conditions”.

And Halfords has cut its profit forecast, citing softer demand in the cycling and car tyre markets on the back of macroeconomic challenges.

It says:

Macro-economic headwinds continue to impact the cycling and consumer tyre markets although we gained share across all our measured markets including Cycling, Motoring and Tyres.

Other big hitters from the UK retail sector have delivered some good Christmas sales numbers so far. Yesterday Sainsbury and JS Sports both said their profits would reach the top end of expectations.

Ministers are being urged to stop the forced installation of prepayment meters, after Citizens Advice revealed that over three million people across Britain ran out of credit last year, the equivalent of one every 10 seconds.

And investors in the financial markets are hoping for a drop in US inflation later today, when December’s Consumer Price Index is released. It is forecast to drop to 6.5%, from 7.1% in November.

• 7am GMT: China vehicle sales data for December

• 9.30am GMT: Latest UK economic and business activity data from the Office for National Statistics

• 1.30pm GMT: US inflation report for December