# Analysis-Europe’s retailers brace for cutback Christmas
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-11-11
Category: BUSINESS
Category URL: https://financedigest.com/category/business
Meta Title: European Retailers Brace for Worst Christmas in a Decade
Meta Description: European retailers are preparing for a challenging Christmas season as consumer spending decreases and business costs rise, impacting profit margins.
URL: https://financedigest.com/analysis-europes-retailers-brace-for-cutback-christmashtml

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By James Davey and Rachel More

LONDON/BERLIN (Reuters) – European retailers fear this Christmas could be the worst in at least a decade as shoppers cut spending while the costs of doing business show no sign of abating, squeezing profit margins.

Despite enduring two Christmases under social restrictions linked to the COVID-19 pandemic, households are looking to spend less this festive season, both on gifts and socialising, as double-digit inflation dents their purchasing power.

Consumer confidence is also at or close to the gloomiest on record as [soaring energy bills add to the spiralling cost](https://www.financedigest.com/amazon-other-retailers-revamp-free-shipping-as-costs-soar.html "Amazon, other retailers revamp ‘free’ shipping as costs soar") of living.

Today, it is the [European consumer I am most worried](https://www.financedigest.com/european-shares-edge-higher-on-healthcare-lift-weak-china-data-stokes-worries.html "European shares edge higher on healthcare lift, weak China data stokes worries") about,” Dirk Van de Put, CEO of Cadbury chocolate maker Mondelez International Inc, said this week.

In Germany, the HDE [retail association is forecasting the strongest slump in Christmas 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") since 2007, with retail sales in the crucial November-December period seen dropping by 4% year on year on a price-adjusted basis.

This remains a difficult time for retail companies,” said HDE managing director Stefan Genth, noting that retailers – faced with higher labour and [energy bills and a stronger dollar pushing](https://www.financedigest.com/energy-bill-support-pushes-uk-budget-deficit-to-february-record.html "Energy bill support pushes UK budget deficit to February record") up purchasing costs – did not have the luxury of being able to offer discounts.

In retail, we have absolutely nothing to give away these days because the [costs are rising](https://www.financedigest.com/fortum-says-rising-costs-of-nordic-power-trading-are-worrying.html "Fortum says rising costs of Nordic power trading are “worrying”") for us just as much,” he said.

In the United Kingdom, a raft of [surveys indicate half or more Britons plan to spend less this Christmas](https://www.financedigest.com/six-in-ten-britons-will-spend-less-at-christmas-deloitte-survey.html "Six in ten Britons will spend less at Christmas -Deloitte survey"). Should September’s sharp drop in [retail sales](https://www.financedigest.com/valentines-day-spending-boosts-british-retail-sales-in-february-brc.html "Valentine’s Day spending boosts British retail sales in February – BRC") be repeated in December, it would be the worst outcome since comparable annual records began in 1989.

Retailers are facing possibly their toughest festive season in a decade as shoppers look to trade down, search out bargains and purchase less to [meet the economic challenges ahead,”](https://www.financedigest.com/sterling-steadies-vs-dollar-ahead-of-boe-ecb-meetings.html "Sterling steadies vs dollar ahead of BoE, ECB meetings") Paul Martin, KPMG’s head of retail said.

Official data showed UK [retail sales](https://www.financedigest.com/spains-november-retail-sales-fall-0-6-on-year.html "Spain’s November retail sales fall 0.6% on year") volumes, excluding fuel, dropped 6.2% year on year in September. The [biggest December falls – of 1.9% – were recorded](https://www.financedigest.com/biggest-uk-house-price-fall-recorded-since-financial-crisis.html "Biggest UK house price fall recorded since financial crisis") in 2010 and 1991, with a lesser drop of 1.1% in 2008 during the global financial crisis.

In the United States, the National Retail Federation (NRF) has forecast [holiday sales rising at a slower pace this year](https://www.financedigest.com/100-years-of-uk-holidaying-habits.html "100 YEARS OF UK HOLIDAYING HABITS"), while Amazon expects its slowest revenue growth for any holiday in years, highlighting Europe as a particular pain point.

SPREADING THE [COST OF CHRISTMAS](https://www.financedigest.com/analysis-east-europeans-count-their-pennies-for-christmas-as-food-costs-soar.html "Analysis-East Europeans count their pennies for Christmas as food costs soar")

Several UK [retailers – including 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 clothing group Marks & Spencer, supermarket Sainsbury’s and fashion retailer Primark – have said Britons are trying to spread the cost of Christmas, buying gifts early to avoid a squeeze in December. They are also trading down more to discounters, with data from consultants McKinsey showing the trend is particularly evident in household products, [frozen foods](https://www.financedigest.com/frozen-foods-market-detailed-analysis-in-forecast-year.html "Frozen Foods Market Detailed Analysis In Forecast Year") and snacks and confectionary. [Discounters Aldi UK and Lidl GB are currently Britain’s fastest growing](https://www.financedigest.com/discount-dining-clubs-tastecard-and-gourmet-society-grow-their-offering-as-chimichanga-and-spaghetti-house-both-sign-up.html "Discount dining clubs tastecard and Gourmet Society grow their offering as Chimichanga and Spaghetti House both sign up") food retailers.

Mondelez’ Van de Put said [European shoppers are buying](https://www.financedigest.com/european-food-delivery-shapes-up-with-getirs-gorillas-buy.html "European food delivery shapes up with Getir’s Gorillas buy") Mondelez sweets like Milka chocolate at discount shops more often but he still expects holiday spending on chocolate – even if it’s less expensive – to be strong.

In times of anxiety and worry, trying to do something for your loved ones, for your kids, [buying them nice seasonal chocolates or biscuits is a very normal thing](https://www.financedigest.com/4-things-to-consider-before-buying-your-dream-car.html "4 Things To Consider Before Buying Your Dream Car") to do,” he said.

A Spanish association of major consumer goods companies in a recent survey found 77% of retailers in the country, home to Mercadona and El Corte Ingles, are [trying to reduce margins and improve](https://www.financedigest.com/what-needs-to-happen-to-improve-the-landscape-for-smes-trying-to-access-finance-options-in-the-uk.html "What needs to happen to improve the landscape for SMEs trying to access finance options in the UK") efficiency in order to keep prices stable.

Another association Acotex expects retailers to offer slight discounts during the holiday season as consumer [demand slows](https://www.financedigest.com/inpost-sees-stronger-2022-but-warns-of-slowing-demand.html "InPost sees stronger 2022 but warns of slowing demand").

People are looking for discounts, but [retailers are seeing](https://www.financedigest.com/uk-retailers-see-40-jump-in-boxing-day-shoppers-springboard.html "UK retailers see 40% jump in Boxing Day shoppers -Springboard") a general increase in their costs and are having to raise prices,” Acotex chief Eduardo Zamacola told Reuters.

Meanwhile, 68% of Italians plan to [cut](https://www.financedigest.com/inpost-sees-better-margin-in-poland-plans-no-job-cuts-this-year.html "InPost sees better margin in Poland, plans no job cuts this year") back on purchases between now and the end of the year and nearly half plan to cut spending on Christmas gifts, according to a survey conducted in October by Italian small retail association Confesercenti and SWG polling institute.

The scenario is worrying…consumers are [losing purchasing power,”](https://www.financedigest.com/softbanks-robotics-ambitions-short-circuit-as-pepper-loses-power.html "SoftBank’s robotics ambitions short circuit as Pepper loses power") said Mauro Bussoni, General Secretary of Confesercenti.

While Christmas 2022 looks extremely tough, market conditions in the 2023-24 financial year look set to be even worse as any savings consumers built up during the pandemic are wiped out and retailers face the most marked rise in the cost of doing [business](https://www.financedigest.com/2018-is-a-year-of-regulation-is-your-business-ready.html "2018 is a year of regulation – is your business ready?") for many years.

(Reporting by [James Davey in London](https://www.financedigest.com/how-to-grow-your-luxury-boutique-brand-online-james-sanders-london-diamonds.html "How to grow your luxury boutique brand online – James Sanders London Diamonds") and Rachel More in Berlin; additional reporting by Elisa Anzolin in Milan and Corina Pons in Madrid; writing by James Davey; Editing by Matt Scuffham and Kirsten Donovan)


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