Markets kick off the New Year with a bang, and will retailers have any festive trading joy?

“The FTSE 100 is off to a solid start in 2020 as the markets eagerly await signature on a phase one trade agreement between the US and China, promised on 15 January.

“Miners were among the top performers and UK property investor British Land topped the list of laggards.

“Although the last 10 years have been turbulent ones for the index, investors would probably be happy if this new decade matched the period, with the FTSE delivering a total return of 104%,” says AJ Bell Investment Director Russ Mould.

Retail Sector

“The post-Christmas reporting season for the retail sector kicks off tomorrow (Friday 3 January) with an update from Next, followed next week by various supermarkets including Tesco, value brands such as B&M and niche players including Topps Tiles. Online operators including Boohoo issue updates later in the month.

“The bad weather in the weeks leading up to Christmas won’t have helped high street operators but the past week’s brighter conditions could have encouraged shoppers to leave the house and go in search of bargains. While that may have provided some relief to retailers, it won’t necessarily be good for profit margins if they’ve had to further slash prices just to shift goods.

“The Office for National Statistics said retail sales fell by 0.6% in November versus the previous month, although those figures don’t include Black Friday sales. That suggests shoppers were delaying their Christmas shopping until closer to the big day.

“More recently, Springboard said footfall had slumped in the morning of Boxing Day, suggesting that rain, a structural shift to online shopping and increased Black Friday spending were potentially to blame.

“These early indicators would suggest the forthcoming retail updates may not be full of joy.

“The perfect situation for retailers would be selling high volumes of goods over the Christmas season at full price. In reality what we might get is subdued volumes at cut price, which is the not the recipe for a healthy business.

“Even online operators may have struggled. While orders increasingly shift online, it is clear that running web-based operations is not straightforward.

“Significant investment still needs to go into warehousing, IT systems and marketing. That means companies need to be making good profits so as to be able to afford ongoing investment in their business to keep them competitive.

“Shares in many UK retailers have enjoyed a rebound since the General Election vote result in December, hitching a ride along with many other sectors as investors regain confidence in UK stocks. Unfortunately many investors could get a reality check when the retailers issue their festive trading updates.

“While there may be the odd retail winner to have escaped the doom and gloom, in general expectations may be too high leading up to the reporting event.”

Scheduled trading updates from the retail sector

Friday 3 Jan
Next

Tuesday 7 Jan
Morrisons

Wednesday 8 Jan
Greggs
Sainsbury’s
Topps Tiles

Thursday 9 Jan
Card Factory
Dunelm
Marks & Spencer
Tesco

Friday 10 Jan
B&M
Mothercare
Moss Bros

Tuesday 14 Jan
Boohoo

Thursday 16 Jan
The Works
N Brown
Associated British Foods (Primark)
Halfords

Thursday 23 Jan
ASOS

These articles are for information purposes only and are not a personal recommendation or advice.