What's going on?

Figures out on Thursday showed this Christmas was the worst for UK shopping in a decade. Grocery stores made the best they could of the wintry weather – but British department stores were gone with the wind.

What does this mean?

Britain’s biggest supermarket chain, Tesco, said on Thursday that festive sales at its UK stores were 2.2% higher than a year ago – their best in ten years – and that it was on track to hit the annual profit targets investors are expecting. But number two Sainsbury’s reported a decline in sales on Wednesday: perhaps justifying its proposed merger with number three Asda, currently under review by UK competition authorities.


British department store John Lewis, meanwhile, grew its sales over the holidays – but nevertheless said on Thursday that conditions were tough enough to make it consider suspending staff bonuses for the first time in its 66-year history. Things are direr still for rival Debenhams: its holiday sales fell by more than 3%, and it’s now thrashing out a turnaround plan with its lenders in a bid to avoid being sheared like Sears.

Why should I care?

For markets: Bellwethers should be heard as well as seen.

Aggressive discounting on the UK retail scene helped sink fashionista ASOS’s profit forecasts in December – and investors subsequently poleaxed its stock. Several other retailers followed suit in sounding the alarm, but investors might not have heard. Shares of middle-class stalwart Marks & Spencer fell after it lamented lackluster sales of its own on Thursday.

The bigger picture: No man island is an island.

Several US retailers also delivered updates on Thursday. While Bed Bath & Beyond shares soared 17% after it updated guidance, Macy’s stock dropped 18%: weaker-than-anticipated sales growth had led to the company slashing its annual sales and profit target. Macy’s wasn’t alone: shares of department store Kohl’s fell 5%, after holiday sales failed to live up to last year’s growth.