B&M and The Works Hit by Tough Christmas Trading Amid Subdued Consumer Confidence
The festive season proved challenging for several prominent UK retailers, with discount chain B&M and value bookseller The Works both reporting weaker sales over the crucial Christmas period. This downturn highlights broader issues of subdued consumer confidence and economic pressures affecting the high street.
B&M Cuts Profit Forecast After Sales Dip
B&M, the FTSE 250 listed discount retailer, has revised its full-year profit guidance downwards following a disappointing third quarter. The company reported a 0.6% decline in UK like-for-like sales for the 13 weeks to 27 December, though it noted some improvement in December after implementing price reductions.
The retailer now expects annual profits to be between £440 million and £475 million, a significant reduction from previous guidance of £470 million to £520 million. This adjustment represents a potential hit of up to £45 million to earnings.
Chief executive Tjeerd Jegen has introduced a "back to basics" strategy focused on reducing product ranges, with the aim of returning the UK business to sales growth within the next 12 to 18 months. This follows a turbulent period for B&M, which ousted its finance chief in October after errors led to two profit warnings within two weeks.
The Works Suffers Delivery Problems and Sales Decline
The Works, the Aim-listed value books and crafts retailer, reported a 4.2% fall in sales over the Christmas quarter, with online sales particularly affected. The company attributed this decline to problems with a new delivery provider, which caused online sales to slump by half.
While store sales showed modest growth of 1.2% on a like-for-like basis over the 11 weeks to last Sunday, investors reacted negatively to the overall performance. Shares in The Works plummeted by 20% in morning trading following the announcement.
Chief executive Gavin Peck expressed disappointment with the delivery issues but noted the company had also been affected by "subdued consumer confidence." He stated: "We have felt the impact of a challenging consumer backdrop. However, we continued to see a positive response to our excellent value and new products over the festive period."
Broader Retail Landscape Shows Mixed Fortunes
The challenging Christmas trading period extended beyond these two retailers, reflecting wider economic pressures on UK consumers. Even retailers that performed relatively well have warned that customers are struggling with higher unemployment and rising prices.
Fashion retailer Primark reported a decline in like-for-like sales during the Christmas quarter, though revenues rose 1.5% on a constant currency basis to £3.5 billion due to price inflation. Its parent company, Associated British Foods, issued a profit warning this month following poor performance in mainland Europe.
In contrast, DIY retailer Wickes reported stronger results, with revenues of £788 million for the six months to 27 December, representing a 6.3% year-on-year increase driven by higher sales.
Market Reaction and Strategic Responses
Shares in B&M fell 4% in early trading on Thursday before recovering to close 0.3% lower, amid a broader market rally following Donald Trump's decision to drop threats of fresh tariffs on European countries.
The difficult trading conditions have prompted strategic reassessments across the sector. Retailers are increasingly focusing on value propositions and operational efficiencies to navigate what many describe as a challenging consumer environment.
As the retail industry enters a new year, these Christmas trading results underscore the ongoing pressures facing UK stores, with consumer confidence remaining fragile amid economic uncertainty and changing shopping habits.
