Speaker 1: The holidays, they're here.
Speaker 2: I'm not surprised.
Speaker 1: I feel like I've been buying Christmas presents for the
Speaker 1: last seven months. But and yet I sound surprised.
Speaker 3: I had a strong start, but now I've got fatigue.
Speaker 1: Now I'm tired of it.
Speaker 3: I think I better return to it once this podcast
Speaker 3: is finished, and once the readout is written, I won't multitask.
Speaker 3: But I find it so interesting what is happening at
Speaker 3: Christmas with spending is often a kind of canary down
Speaker 3: the mine or a sort of indication of the economics
Speaker 3: of the coming year, and obviously there were likely to
Speaker 3: be an election in that year, and it's just interesting,
Speaker 3: I think also because people get together with families from
Speaker 3: different generations, and I think it's probably that moment when
Speaker 3: voters start to say, yeah, what am I What am
Speaker 3: I going to do with my vote this year? If
Speaker 3: they're swing voters, which a large large number of people are.
Speaker 3: So I think, you know, I'm really looking forward to
Speaker 3: hearing from Andrew and Katie because their copy as well
Speaker 3: inside Bomberg, is always point. It's always one point, and
Speaker 3: it always tells you something about the psyche of the
Speaker 3: of the nation.
Speaker 1: Yeah, and they have different perspectives. So we'll talk a
Speaker 1: little bit about luxury, we'll talk about retail, we'll talk
Speaker 1: about the high street, but we'll also talk about food,
Speaker 1: which is such a you know, prominent important.
Speaker 3: Christmas.
Speaker 1: Yeah, welcome to In the City, Bloomberg's podcast, connecting you
Speaker 1: to the conversations and the stories shaping the world of finance.
Speaker 1: I'm froncing like wow with a Legra Stratton and this
Speaker 1: week we talked to Andrea and Katie to try and
Speaker 1: really feel the temperature for shopping across the UK. We're
Speaker 1: delighted to be joined by Andrew Felstad, Bloomberg opinion columnists
Speaker 1: covering consumer goods and the retail industry, and Katie Lindsel,
Speaker 1: Bloomberg UK retail reporter. So this is like a dajavoo.
Speaker 1: We did this exactly twelve months ago and everyone was
Speaker 1: excited about Christmas because there was like revenge Christmas and
Speaker 1: people after two very long years of lockdown, we're going
Speaker 1: to get together. This year just feels a lot different.
Speaker 2: Yes, I think, I mean lockdown is still in our
Speaker 2: living memory, so I think people do want to get
Speaker 2: out and shop, but we've had a really ongoing cost
Speaker 2: of living crisis now, and so people are really looking
Speaker 2: at how much they can spend. And I mean my
Speaker 2: view is that it's going to be a bit of
Speaker 2: a doom and gloom one. I don't know if Andrew
Speaker 2: is quite so so negative as I am, but already
Speaker 2: we've seen November sales were weaker than people hoped, so
Speaker 2: I'm a bit negative on this one.
Speaker 4: I don't think it's going to be a spark club,
Speaker 4: but I don't think it's going to be a stinker either.
Speaker 4: It's going to be kind of fair to middling. Last year,
Speaker 4: I was absolutely convinced it will be a good Christmas
Speaker 4: and it turned out to be so because, as Katie said,
Speaker 4: it's the first year for three that we didn't have
Speaker 4: any COVID restrictions. This year, I'm not quite so optimistic.
Speaker 4: On the plus side, we haven't got as many strikes
Speaker 4: as we had this time last year. If you look
Speaker 4: around this time lat year, it was actually snowing, always
Speaker 4: bad for football. Inflation is coming down, so that's that's
Speaker 4: all pretty good stuff. On the negative side, as Kate said,
Speaker 4: the cost of living crisis has not gone away, and
Speaker 4: on heating we're not getting the government support. Plus interest
Speaker 4: rates are probably more of a worry this time for
Speaker 4: this Christmas than they were a year ago, So a
Speaker 4: bit of a ho hum Christmas. It's not ho ho no,
Speaker 4: but it's not ho ho hooray either.
Speaker 3: What we're here for. Can I just ask a question,
Speaker 3: which is is that sort of lockdown is still in
Speaker 3: people's memories? Does that effect buying? Is it effect buying
Speaker 3: because they've still got some COVID savings saved up? Or
Speaker 3: does it affect buying because people are actually thinking, oh,
Speaker 3: I remember two years ago when we couldn't leave our houses.
Speaker 3: I'm going to go and shop.
Speaker 2: How does it?
Speaker 3: How does it?
Speaker 2: I think the COVID savings really started to be eroded
Speaker 2: by now. That's something that retailer's really kind of erode
Speaker 2: on over the past year or so, saying, even though
Speaker 2: we have this terrible inflation, people really saved over COVID.
Speaker 2: I think now the key comparison to make is that
Speaker 2: people are really getting out to shops. You know, we're
Speaker 2: yet to see how much they're spending when they're in
Speaker 2: these shops, but when you're around London and some of
Speaker 2: the key shopping districts, it is busy people. People can
Speaker 2: get out now with less of a fear of a pandemic,
Speaker 2: and they're in restaurants, they're in bars, they're in all
Speaker 2: the all the kind of great shops of London. So
Speaker 2: that's really encouraging. And online has come back a bit.
Speaker 2: Having said that, you know, I think online will still
Speaker 2: have its time over Christmas. I personally am going to
Speaker 2: be glued to my screen doing boring online shopping. But yes,
Speaker 2: I think I think the pandemic is still a key
Speaker 2: comparison period.
Speaker 4: I think there won't be that automatic lift that we
Speaker 4: got last year because everybody was out seeing family and friends. Again.
Speaker 4: I just don't think we're going to get that surge
Speaker 4: that we automatically got, so retailers, restaurants, they're all going
Speaker 4: to have to work harder for everything this year.
Speaker 1: So what are people buying? I mean, what do people
Speaker 1: not want to buy?
Speaker 2: I think gifting is the key area where spending is
Speaker 2: actually coming back a bit so PwC their figures for
Speaker 2: spending over the Christmas season is thirteen percent down at
Speaker 2: twenty billion, So really it sounds bad on the part
Speaker 2: of consumers, but it's an area where if you have people,
Speaker 2: you don't have to gift to don't. If you have
Speaker 2: people who you do love a lot, you're going to
Speaker 2: be spending gifts on them, but you might spend a
Speaker 2: little bit less. Having said that, Black Friday wasn't the
Speaker 2: big boom that was hoped, it's kind of turned more
Speaker 2: into a Black November, and the British Retail Consortium said
Speaker 2: it got off to a really good start that sort
Speaker 2: of Black November, and then kind of fizzled out towards
Speaker 2: the end. So I think people are being a bit
Speaker 2: more frugal with their gifting and really being quite quite
Speaker 2: careful with where they spend their money.
Speaker 4: And I think the other area that's really suffering at
Speaker 4: the moment is big ticket items, you know, any big
Speaker 4: other than holidays, which still seems to be doing well,
Speaker 4: but sort of Home Renovation's home furnishings. Even Halford said
Speaker 4: that people weren't spending on expensive bikes as much now.
Speaker 4: One thing that I thought was really interesting last year
Speaker 4: the big gift was the dice in air wrap. This
Speaker 4: year we've seen like one hundred pounds off. It's back
Speaker 4: to full price or nearly it's normal four hundred and
Speaker 4: eighty pounds price in many places, but it's still that
Speaker 4: was a big discount on an expensive purchase. So I
Speaker 4: think it's those big where you have to spend out
Speaker 4: a lot of money that are really being rained in.
Speaker 2: Yeah, like watches and jewelry, these items that you might
Speaker 2: think would be a go to for gifting at Christmas.
Speaker 2: People aren't really pulling back on those treats.
Speaker 3: So they're pulling back on the big amounts. But are
Speaker 3: you seeing that there's more smaller amounts that's sort of
Speaker 3: spreading the love more.
Speaker 2: I think it's hard to know. I mean if we
Speaker 2: look at sort of fashion, I think that's going to
Speaker 2: be a tricky area over Christmas. Makeup, makeup, Yeah, we
Speaker 2: talk about the lipstick index, don't we in this kind
Speaker 2: of economy, So I think people are going to be
Speaker 2: going for sort of affordable beauty items, affordable clothing here
Speaker 2: and there. I mean one of the items that I
Speaker 2: hear is doing very well is this thing called a
Speaker 2: snuggle hoodie, which is yeah, absolutely because sort of snuggly
Speaker 2: fleecy goes over your head, covers your whole torso. And
Speaker 2: I think there's also a reader cross here to energy bills.
Speaker 2: You know, if you if you can kind of turn
Speaker 2: down your heating a bit and being your snuggle hoodie.
Speaker 2: That's that's the way to go, and they're not very expensive.
Speaker 4: I think Katie's touched on something really important here looking
Speaker 4: back on this year, it's been much better than people
Speaker 4: have expected. I mean, next said that the consumer had
Speaker 4: really defied gravity this year, and I think Katie's exactly
Speaker 4: put a finger on why, because we've all adapted. So
Speaker 4: we've worn a snuggle hoodie indoors but turned our heating down.
Speaker 4: We've shopped in audi your liddle or we've bought own
Speaker 4: label products and we've we've really adapted to the situation,
Speaker 4: which is why consumer spending has been so much better
Speaker 4: this year than I predicted backing back last year.
Speaker 3: My favorite is the electric heater, the mattress topper, which
Speaker 3: I brought.
Speaker 2: Quite a few of.
Speaker 1: What is that which I need in my life?
Speaker 3: You have to my kids put it on three and
Speaker 3: then when they're asleep.
Speaker 2: I have to go and kind of cooking.
Speaker 3: But what so we saw recent I think it was
Speaker 3: last Friday, we saw a survey of the electro is
Speaker 3: not the electric of consumers and their expectations of inflation
Speaker 3: are that it comes down. How does that? How does
Speaker 3: that What do you think with your expertise, what does
Speaker 3: it impact your.
Speaker 4: Be I think it is going to come down. I
Speaker 4: think food prices are going to come down. And my
Speaker 4: prediction for next year as we get a supermarket price
Speaker 4: war because and the way this will happen is through promotions.
Speaker 4: Because the branded, the big branded manufacturers have ceded a
Speaker 4: lot of volume to private label and they will want
Speaker 4: to try and claw that back. They don't want to
Speaker 4: necessarily reduced prices, but you will see a lot of
Speaker 4: special offers and the supermarkets will fight for those sales.
Speaker 4: And the way that they'll do it is through their
Speaker 4: loyalty cards. The other really interesting thing about food is
Speaker 4: when inflation is rising, everybody can win because everybody's seals
Speaker 4: goes up when it comes down, particularly if costs are
Speaker 4: still going up, like we've got the minimum wage going up,
Speaker 4: they all have to fight for share and what they need,
Speaker 4: they need like weak players to feed off. And at
Speaker 4: the moment we've got two We've got Morrisons, we've got Asda,
Speaker 4: both in private hands. So I predict a supermarket price
Speaker 4: war to put pressure on Morrison's and Asda. So I
Speaker 4: think that will feed into bills next.
Speaker 2: Year, and what's happening with John Lewis well, and they're
Speaker 2: in the shape with Waitros and how Waitross are the pointing.
Speaker 2: I mean, it depends if we look at John Lewis.
Speaker 2: I think this Christmas is so crucial and we won't
Speaker 2: hear from the mental march to know how it's gone.
Speaker 2: But really, you know, they need to really show their
Speaker 2: strength in this environment, and online is quite key for
Speaker 2: John Lewis, and I think they're you know, they're competing
Speaker 2: with the likes of Amazon, who can get the delivery
Speaker 2: to you the next day, and it's really tough. Going
Speaker 2: to Andrew's point about the supermarket price war, I think
Speaker 2: Waitros is in a really weak position. They desperately need
Speaker 2: some funding to invest in their stores and pull in shoppers.
Speaker 2: And I think a lot of those high end shoppers
Speaker 2: who are doing relatively well through the cost of living
Speaker 2: crisis are going to mines instead. Christmas is the kind
Speaker 2: of time of year when waitress should be really getting
Speaker 2: shoppers in through the door for canapees and party treats
Speaker 2: and all that sort of thing, and I think it's
Speaker 2: it's yet to be seen if they manage that this year.
Speaker 2: So it's going to be really tough.
Speaker 3: Okati, you said, it's a shame we have to wait
Speaker 3: until March. I think you said for John Lewis or
Speaker 3: what what happens if it's been a bad Christmas.
Speaker 2: Well for the other retailers, we get lots of January updates,
Speaker 2: so we do find out relatively soon on how their
Speaker 2: trading has gone this time last year. Well sorry, January
Speaker 2: last year we had lots of the supermarkets, as Andrew said,
Speaker 2: with with the impact of inflation, lots of super markets
Speaker 2: coming out saying oh we had a record Christmas. You know,
Speaker 2: shoppers really spent with us. Of course they did. Because
Speaker 2: prices are so high in food, we're all sort of
Speaker 2: spending more to get less. I think this this coming January,
Speaker 2: with this with food, it's going to be another story
Speaker 2: of a bumper Christmas of spending. I think Kantara are
Speaker 2: forecasting thirteen just over thirteen billion pounds of spend, a record.
Speaker 2: So yeah, we will we will see how things go
Speaker 2: in the early New years. There's a record because it's
Speaker 2: more expensive, it is, yeah, and also, of course food
Speaker 2: is a necessity. We all have to buy it at Christmas.
Speaker 2: We trade up, we buy the more premium items. Even
Speaker 2: if you're still sticking to your Algie and you're little,
Speaker 2: you're buying your more premium items within those supermarkets. So
Speaker 2: it should it should go well in that sector of retail.
Speaker 1: We had loads of supply chain issues, didn't we last year?
Speaker 1: And I remember mind Christmas presents in like October. Cxandra
Speaker 1: came on TV and said, you know, it's going to
Speaker 1: be really difficult to get a hold of Lego. We
Speaker 1: didn't have any of that.
Speaker 4: No, that's really gone on, what that's really gone away now? Yeah,
Speaker 4: And that's I think that's one of the reasons why
Speaker 4: we or quite a lot of discounting on Black Friday
Speaker 4: because last year, Yeah, last year we've you know, we
Speaker 4: had like, you know problems, and you know, I think
Speaker 4: the year before was a really bad one. Last year
Speaker 4: it was coming to an end. And also people had
Speaker 4: like a lot of stock last year because they they bought,
Speaker 4: they'd bought loads early. So I didn't think that we're
Speaker 4: going to get it supply chain eased up.
Speaker 2: It all arrived, particularly.
Speaker 4: In the US, just when people were you know pulling
Speaker 4: in the purse string, so they were all stuck with
Speaker 4: too much stock. So no, we I think the supply
Speaker 4: chain is pretty much back to normal this year.
Speaker 1: How's the luxury market doing? I mean again the price up.
Speaker 1: You know, they've been able to bump a Pricer so
Speaker 1: much it's almost a little bit of scene exactly.
Speaker 4: Luxury is really slowing. So it's taken a while. But
Speaker 4: as with many of the as many as with many
Speaker 4: of the pandemic spending habits, it's taken a really long
Speaker 4: time for them to unwind. But it is really unwinding
Speaker 4: on luxury. As Katie mentioned, those pandemic savings, we had
Speaker 4: nothing else to do without our money. So a man,
Speaker 4: it was a rolex. For a lady, it was a
Speaker 4: new handbag that really powered the luxury market. That's really unwinding.
Speaker 4: And I'm not optimistic that the Chinese consumer is going
Speaker 4: to come back and save the day. Because obviously the
Speaker 4: Chinese VIPs treated very well at home. Now all the
Speaker 4: brands have wonderful stores, wonderful service in China, the middle
Speaker 4: class are going to be under pressure from the weakening
Speaker 4: economy plus the inflation in flights, hotels, that sort of thing.
Speaker 4: I'm not convinced Chinese consumer is going to ride back
Speaker 4: to Europe and spend and particularly the UK is very
Speaker 4: difficult in that market because of the loss of tax
Speaker 4: free spending.
Speaker 2: Yeah, when you talk to luxury retailers in London as
Speaker 2: well as hoteliers, high end restaurants, they are really, you know,
Speaker 2: upset about the fact that we have this so quoted
Speaker 2: tourist tax. This is the time of year when you
Speaker 2: would want wealthy foreign shoppers to be coming to London.
Speaker 2: And I was in Selfridges recently. I mean it still
Speaker 2: looks fantastic, are still packed with shoppers, but really it's
Speaker 2: not the kind of Christmas that we've had in previous
Speaker 2: years because people are choosing to spend in Paris and Milan.
Speaker 2: You've even got British shoppers buying their barbery and their
Speaker 2: mulberry outside the UK because it's cheaper. So it is
Speaker 2: a very tough environment there.
Speaker 3: So can I ask you sort of helicopter view question
Speaker 3: having you both talked in amazing granularity about British shoppers,
Speaker 3: but really fundamentally, do you think people will be feeling
Speaker 3: comfortably off this Christmas or really under it under pressure?
Speaker 3: What's the sort of macro picture, Because the reason I
Speaker 3: asked the question is I sus. You know, the government's
Speaker 3: view is if people in the months prior to an
Speaker 3: election feel all right, then that's the sort of decent
Speaker 3: basis on which to go to the electorate. So it's
Speaker 3: not actually a kind of many years previous comparison people make.
Speaker 3: People don't think like that. People think, do I feel
Speaker 3: a bit better than last Christmas? Basically, I think.
Speaker 4: It's going to really depend who you are, what your
Speaker 4: income is, do you have a mortgage, how much of
Speaker 4: your spend do you spend on essentials. It's you know,
Speaker 4: I think older people have done very well this year
Speaker 4: with you know, many of them don't have mortgages. They've
Speaker 4: seen their pensions go up, they've seen their investments go
Speaker 4: up for the first time they're actually getting a bit
Speaker 4: of return on their savings. But I think younger middle
Speaker 4: life families will be really suffering from the interest rate rises.
Speaker 4: You know, school fees have gone up like massively. If
Speaker 4: you want a holiday, you're having to spend a lot
Speaker 4: more on a holiday, so I think, and then you've
Speaker 4: got the very lowest consumer that spends a lot more
Speaker 4: money on essentials have really been hurt by food energy,
Speaker 4: So I think I don't think you can say like
Speaker 4: one consumer exactly, of course.
Speaker 3: I think the one thing, the interesting thing is that
Speaker 3: that older population, for that they've done very well. They
Speaker 3: do care about their children and their grandchildren. If they
Speaker 3: can see that they're having a difficult Christmas, it's not
Speaker 3: straightforward that they feel sort of smug.
Speaker 4: The other thing I think, I think there's two things
Speaker 4: that really are going to matter as we're going to
Speaker 4: next year. One is the labor market and one is
Speaker 4: the property market. The labor market's calling doesn't seem to
Speaker 4: falling off the cliff. People make the biggest changes to
Speaker 4: their spending when they lose their job or when they
Speaker 4: see friends and family being made redundant. The housing market again,
Speaker 4: calling hasn't fallen off a cliffs. If you take those things,
Speaker 4: it's not looking too bad. I'm not as pessimistic for
Speaker 4: next year as I was this time last year. And wages,
Speaker 4: wages are calling, but they're still above inflation and so
Speaker 4: really comes of holding up.
Speaker 2: I think wages absolutely As you say, that's that sort
Speaker 2: of key thing and Andrew mentioned next earlier. I think
Speaker 2: M and S have also flagged this that going forwards,
Speaker 2: we need to look at how people are spending when
Speaker 2: they get their pay packets. I think next have been
Speaker 2: so strong this year, you know, for profit upgrades over
Speaker 2: the course of roughly the same number of months, because
Speaker 2: they were happily surprised by how much shoppers when they
Speaker 2: got their pay rise impacted by inflation, they were actually
Speaker 2: choosing to go ahead and spend. But as we as
Speaker 2: the months go through and inflation continues to be a burden,
Speaker 2: that paypacket isn't going to mean as much as it
Speaker 2: did months earlier. So I think there could be times
Speaker 2: in twenty twenty four when it gets a bit tough
Speaker 2: and M and S guided to their strong performance being
Speaker 2: in the first half with the second half being a
Speaker 2: weaker environment, so we have to see going forwards how
Speaker 2: strong wages stand up against inflation.
Speaker 1: Are there any retailers that we should actually worry about
Speaker 1: going forward?
Speaker 2: KPMG have warned of there being casualties early next year.
Speaker 2: They said online only retailers are the ones to look at,
Speaker 2: and I think we have seen quite a lot of
Speaker 2: weakness in online only fashion, so I think that could
Speaker 2: be a really difficult environment. And in terms of the
Speaker 2: strength of the high street, you know, we already had
Speaker 2: some quite major calamities in twenty twenty three. I mean,
Speaker 2: Wilco is probably the main one to mention their biggest
Speaker 2: retail in Solvac since Wilworth's in two thousand and eight.
Speaker 2: So Christmas always tends to weigh on certain retailers. So
Speaker 2: I think come January February it could be a busy time.
Speaker 2: That was perfect.
Speaker 1: Thanks for listening to this week's in the City. We'll
Speaker 1: be back next week, but in the meantime, if you
Speaker 1: like our show, please head on over to wherever you
Speaker 1: listen to podcasts and rate, review and subscribe. It does
Speaker 1: help people find the show. This episode was hosted by
Speaker 1: me Francine Laqua and Alegra Stratton. It was produced by
Speaker 1: Summersadi and Tiffany Schoy. Additional editing by Blake Maples and
Speaker 1: special thanks to Andrea Felsted and Katie Linsel.