# After Christmas relief UK retailers face 2023 reality check
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2023-01-06
Category: BUSINESS
Category URL: https://financedigest.com/category/business
Meta Title: UK Retail Outlook 2023: Profit Decline Expected Amid
Meta Description: Get insights on the impact of inflation, low consumer confidence, and rising living costs on UK retailers following the festive season.
URL: https://financedigest.com/after-christmas-relief-uk-retailers-face-2023-reality-checkhtml

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By James Davey

LONDON (Reuters) – Updates next week from Britain’s biggest retailers including Tesco, Sainsbury’s and Marks & Spencer are expected to confirm that while Christmas was not the disaster that some had feared, consumer demand is set to weaken in 2023, denting profit.

Ahead of Christmas, European retailers fretted that the key trading period could be the worst in at least a decade.

But in Britain, despite UK inflation running at 10.7% and consumer confidence close to record lows, [retailers that have reported so far on festive sales](https://www.financedigest.com/uk-retailers-turn-positive-on-sales-hopes-after-bleak-winter.html "UK retailers turn positive on sales hopes after bleak winter"), including clothing retailer Next, fast food chain Greggs and discounters B&M and Aldi UK have performed well.

Though train and postal workers strikes caused some disruption to trade, Christmas 2022 was the first not impacted by [COVID-19 restrictions since 2019 and despite the ongoing cost of living](https://www.financedigest.com/freedom-day-sydney-reopens-as-australia-looks-to-live-with-covid-19.html "‘Freedom Day’: Sydney reopens as Australia looks to live with COVID-19") challenges Britons appear to have prioritised festive spending.

But the consumer outlook for 2023 is poor, with the government’s budget watchdog having predicted the [biggest squeeze on living standards since](https://www.financedigest.com/dollar-retreats-headed-for-biggest-weekly-loss-since-mid-january-bitcoin-down.html "Dollar retreats, headed for biggest weekly loss since mid-January; bitcoin down") records began in the 1950s.

Next, often acclaimed as a bellwether for the UK consumer economy, said it [expected sales and profit](https://www.financedigest.com/portuguese-airline-tap-swings-to-profit-earlier-than-expected.html "Portuguese airline TAP swings to profit earlier than expected") to fall in 2023.

The strain on Britons’ household budgets is likely to begin to tell this month as [Christmas credit card](https://www.financedigest.com/king-charles-releases-photo-for-first-christmas-card-as-monarch.html "King Charles releases photo for first Christmas card as monarch") bills arrive.

UK [consumers will this year face persistent](https://www.financedigest.com/uk-consumer-mood-hits-one-year-high-but-financial-gloom-persists.html "UK consumer mood hits one-year high, but financial gloom persists") inflation in essential goods, particularly food and energy.

They also face [scaled back](https://www.financedigest.com/mifid-ii-why-you-should-not-scale-back-your-implementation-efforts.html "MIFID II: WHY YOU SHOULD NOT SCALE BACK YOUR IMPLEMENTATION EFFORTS") government support on household energy bills and some higher taxes, while a lot will have to deal with higher mortgage costs as their fixed interest rate deals expire.

PROFIT DECLINE

Monthly till data from market researcher Kantar has already showed Tesco and Sainsbury’s grocery sales rose 6.0% and 6.2% respectively in the Christmas quarter, albeit with volumes down, so the likely focus of their own updates will be the [profit outlook](https://www.financedigest.com/britains-next-sees-lower-profit-in-2023-as-consumer-outlook-darkens.html "Britain’s Next sees lower profit in 2023 as consumer outlook darkens").

We sense that the UK supermarkets have gained overall share of [retail expenditure in December as folks focused upon food](https://www.financedigest.com/france-leans-on-retailers-to-help-consumers-cope-with-food-prices.html "France leans on retailers to help consumers cope with food prices") and beverages in particular,” said Shore Capital analyst Clive Black.

Most analysts expect Tesco to reaffirm guidance, that was edged down in October, for 2022-23 [retail adjusted operating](https://www.financedigest.com/iveco-to-transfer-nordic-retail-and-commercial-operations-to-hedin.html "Iveco to transfer Nordic retail and commercial operations to Hedin") profit of 2.4-2.5 billion pounds, down from the 2.65 billion made in 2021-22.

Sainsbury’s current [guidance is for 2022-23 underlying pretax profit](https://www.financedigest.com/christmas-fizz-prompts-uks-sainsburys-to-lift-profit-guidance.html "Christmas fizz prompts UK’s Sainsbury’s to lift profit guidance") of between 630 million and 690 million pounds, down from the 730 million pounds made in 2021-22.

Analysts see Sainsbury’s as more [challenged than other supermarket groups because its ownership of the Argos general merchandise business](https://www.financedigest.com/new-business-launches-to-support-it-professionalsfacing-mission-critcial-sector-challenges.html "NEW BUSINESS LAUNCHES TO SUPPORT IT PROFESSIONALSFACING MISSION CRITCIAL SECTOR CHALLENGES") leaves it more exposed to pressure on consumers’ disposable income.

Clothing and food [group Marks & Spencer is also expected to report a rise in sales – with analysts at Barclays](https://www.financedigest.com/shareholder-group-iss-backs-barclays-board-over-former-ceo-staley.html "Shareholder group ISS backs Barclays board over former CEO Staley") forecasting sales growth over the Christmas quarter of 4.7% in food and 5.7% in clothing and homewares.

M&S’s apparel [business will likely have benefited](https://www.financedigest.com/5-ways-cfo-and-cio-collaboration-can-benefit-the-business.html "5 Ways CFO and CIO collaboration can benefit the business") from Britain’s severe cold snap in December which Next said dramatically boosted sales.

However, M&S has already forecast profit to [fall in its 2022-23 year](https://www.financedigest.com/spains-november-retail-sales-fall-0-6-on-year.html "Spain’s November retail sales fall 0.6% on year"), having warned in November of a “gathering storm” of higher costs and pressure on household budgets.

(Reporting by James Davey; editing by David Evans)


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