British retailers face an inflationary hangover after a flat Christmas

London — UK consumers enjoyed Christmas, the result of the country’s largest retailer show, before the sober reality of rising prices in 2022 became a reality.

Retailers Tesco, Marks & Spencer, and Next rushed into supermarket aisles in search of tempura shrimp, gin novelty bottles, and turkeys as pubs and restaurants were abandoned due to the increase in COVID-19. It exceeded expectations in the last few weeks. ..

However, they warned that higher fares, warehouse worker wage increases, and more expensive raw materials would cause pain as the entire business was under pressure.

Retailers also did not see immediate relief from supply chain disruptions. Online fast fashion retailer ASOS has flown more inventory from Asia at a higher cost to guarantee Christmas delivery.

Trading updates provide an early indication of how retailers around the world carried during the festive season, with revenues from major US and European groups expected later this month and next month.

Britain’s most renowned retailer, M & S, a provider of food, clothing and household goods, has largely maintained its policy to combat rising prices, but said inflationary pressures on the pipeline were rising in 2022. Stated.

“We must try to balance that and do the right thing for consumers,” M & S Chief Financial Officer Eoin Tonge told reporters.

He said inflation in the food market for the 12 weeks leading up to December was 2.7%, rising to 3.5% in December, but M & S didn’t tell shoppers much.

UK consumers are already witnessing rising food prices, post-Brexit economic barriers are pushing up trade costs, and taxes and energy prices are expected to rise in April. The Bank of England expects to reach 6% in April, the highest since 1992 before consumer price inflation eased.

Household spending, which accounts for nearly two-thirds of the UK economy, remained strong until the end of December, according to official economic surveys, but the lack of thermal spending in the spring will hurt retailers at high costs. ..

Soaring costs

Tesco, the UK’s largest retailer, said inflation in operating costs has risen by about 5% from normal levels or 2-3%.

“There is no doubt that there is inflationary pressure. It’s very difficult to predict what will happen in the coming months, but we’ll do our best to manage it,” CEO Ken Murphy said. Told to.

Fast fashion groups are struggling as supply chain disruptions limit their ability to quickly deliver new ranges from Asian factories to their customers. ASOS said it has already introduced low-to-mid-single-digit price increases to offset cost inflation.

ASOS logo
In this illustrated photo taken on October 13, 2020, the keyboard and shopping cart are displayed in front of the displayed ASOS logo. (DadoRuvic / Illustration / Reuters)

This fits in with comments from Japanese clothing retailer Uniqlo, saying that prices will rise somewhat due to higher shipping and raw material costs.

ASOS said it is cheaper than many rivals despite the pressure and expects to keep demand as some shoppers don’t spend two years on vacations or weddings. Retailers added that unlike winter coats coming from China, factories that produce the spring-summer range are closer to home.

“I think there is more demand to do,” Chief Operating Officer Matt Dan told reporters. He said fares were high but flat, and recent wage increases for warehouse workers closed the staff gap.

Supermarkets are more UK with the arrival of the Omicron variant of the coronavirus at Christmas, even though the last-minute blockade in December hit hospitality and wasn’t as restrictive as in 2020, which boosted supermarket sales. He said that people are now at home. It provided a rigorous comparison.

On Christmas 2021, Tesco sold over 8 million bottles of champagne and sparkling wine, highlighting smoked salmon as one of its bestsellers. By comparison, Pub Group’s Mitchells & Butlers sales were down 10.2% in the four weeks of Christmas compared to the pre-pandemic period.

M & S said it sold a quarter of the country’s fresh turkey with more than a million illuminated snow globe gin. Both M & S and Tesco have improved their profit outlook.

James Davey, Paul Sandle, Kate Holton