British retailers have suffered their worst Christmas in ten years. With 2004 like-for-like festive period sales well down on 2003, many leading British retailers are reflecting upon lacklustre revenues and wondering how to shake off the gloomy outlook. With more uncertainty predicted for the UK economy in 2005, the results are indicative of tough times ahead.

While total sales were 2.5% higher than in December 2003, like-for-like sales, the industry’s most closely watched benchmark, were down 0.4% on the previous year’s figures according to the British Retail Consortium (BRC) and KPMG. Only sales of food and drink showed real growth.

In particular, consumers have been reluctant to commit themselves to high value purchases with the so-called ‘big-ticket’ items suffering most over the festive period. Shoppers held off buying such items in the face of rising interest rates and a weakening housing market. Clothing and furniture retailers especially suffered, while sales of CDs and DVDs were also not as strong as expected.

Leading retail names, such as Woolworths and Next, have already reported disappointing sales for the festive season, while another, Marks and Spencer, warned that profits for the period would fall short of expectations, as discounting was needed to shift unsold stock. Its food business, which had struggled in October and November, did pick up somewhat in December, but this will do little to hide what has been another turbulent year.

It is important to bear in mind that a more concrete picture of consumer market performance will not emerge until late next month when official data on sales in January is available. It is equally important to consider that the sales in traditional stores have seemingly been hit by a huge growth in Internet retailing this Christmas – a trend that is surely only set to grow in the years ahead, despite anecdotal evidence of delivery delays this Christmas on certain popular sites.

Regardless, the diminishing consumer confidence created by uncertainty over the economy and housing market dominated December figures and remains a strong concern for the retail sector, with little sign of these worries abating in the immediate future. It could well be a lengthy New Year’s hangover on the British high street.

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