John Lewis has thrown its annual staff bonus into doubt after figures revealed high street stores suffered their worst Christmas in a decade.
Tills stayed silent and heavy discounting failed to lure shoppers as December saw the worst total retail sales since 2008, according to a British Retail Consortium (BRC) index.
Overall, UK retail sales slumped 0.7% when compared like-for-like with the previous year, 2017, when December sales leaped 1.4%.
John Lewis & Partners, which includes supermarket Waitrose and is owned by staff through a partnership model, said slower than expected growth in sales of 1.4% meant dishing out a share of profits to workers “may not be prudent”.
Sir Charlie Mayfield, chairman of the John Lewis Partnership, told the BBC: “Two main factors are affecting the retail sector – oversupply of physical space and relatively weak consumer demand.
“Despite this, we had a positive Christmas trading period, thanks to the extraordinary efforts of partners in our business.”
He added that the firm’s full-year profits would be “substantially” lower this year.
Meanwhile, broader trends amongst shoppers saw people “choose not to splash out”.
Troubled department store Debenhams, which plans to close 50 stores, saw sales slump 5.7% in the 18 weeks to 5 January, while Marks and Spencer saw a 2.2% fall over Christmas.
BRC chief executive Helen Dickinson said: “The worst December sales performance in 10 years means a challenging start to 2019 for retailers, with business rates set to rise once again this year, and the threat of a no-deal Brexit looming ever larger.”
She said the retail landscape is “changing dramatically” in the UK, while the trading environment remains tough.
The joint BRC-KPMG study revealed discounting and early sales in stores and online did little to inspire people to spend.
Food retailers enjoyed increased demand, however, with Sainsbury’s saying on Wednesday that its convenience store arm enjoyed its best ever day of trading on Christmas Eve.
Paul Martin, UK head of retail at KPMG, said: “Retailers experienced little festive cheer this year, with total sales in December delivering zero growth on last year.
“This comes despite some retailers desperately attempting to generate sales through slashed pricing, which has seemingly not been enough to encourage shoppers.
“Growth in food did provide a glimmer of hope, being among the few categories to notice an uptick.”
Experts said the figures were “worse than feared” and revealed the perilous challenge facing some well-known brands.
Richard Lim, of consultancy Retail Economics, said: “These results are worse than we’d feared and hammer home the message that all is not well on our high streets.
“The ongoing shift towards online shopping made life difficult for retailers over-exposed to high streets with dwindling levels of footfall. What’s more, the extraordinary level of discounting in the run-up to Christmas would have quickly eroded margins during the industry’s most vital period. Inevitably, this will have left many retailers in a more precarious financial situation heading into 2019.”
Meanwhile, a separate report from Barclaycard said consumer spending grew 1.8% year on year in December, the lowest rate of growth seen since March 2016.
Data from Barclaycard, which sees nearly half of the nation’s credit and debit card transactions, showed that essential spending growth dipped to just 0.6% - the lowest figure recorded since July 2016 - caused by a contraction in supermarket spending.
Esme Harwood, director at Barclaycard, said: “Growth in consumer spending dropped to its lowest level since 2016 and represents a decline in real terms.”
She said consumers “remain cautious amidst ongoing economic uncertainty”.