John Lewis tends to set the tone early on and is seen as one of the strongest performers. They have reported total like-for-likes up 4.8 per cent which is a good figure but shop sales were flat whilst online was up 19 per cent. This implies that one-quarter of their sales are now online – they also reported that sales in the week of Black Friday exceeded those of the week in the run-up to Christmas. This is the same mix that has evolved in the US with electricals and home technology products being the strongest in the Black Friday week.
It will be interesting to see how the food retailers have fared and how their battle with the discounters has panned out. General retailers have performed well over the last few months as the market has priced in the effect of the oil price feeding into consumer’s discretionary spending.
Performance of indices over 5yrs
Source: FE Analytics
The internet has empowered the consumer with pricing knowledge where the cheapest deals are now only a click away on a smartphone or tablet. Those who have not moved with this technology and subsequent delivery revolution will have suffered. We have heard about Marks & Spencer and the Royal Mail having recent operational issues and even John Lewis has complained about how Black Friday has impacted their back office operations – they hinted they are less enthusiastic on the Black Friday phenomenon going forward.
This week also saw the latest inflation figure from the eurozone. There has been lots of talk over the New Year following comments from Mario Draghi in a newspaper interview where he said ‘We are making technical preparations to alter the size, pace and composition of our measures in early 2015’. This has been interpreted as meaning the ECB will soon adopt sovereign debt quantitative easing, possibly as soon as their next meeting on 22 January.
Meanwhile, the political situation in Greece has become unstable with a snap election called after their parliament failed to elect a new president on 29 December. This is likely to return the radical left party, Syriza, which is anti-austerity and will put Greece on a confrontational path with the European Central Bank, European Union and International Monetary Fund.
The prospect of this caused significant volatility when it reared its head at the last general election in 2012 whereas market reaction this time around has been muted so far.
Perhaps this is due to the realities of the Greek economic predicament. Saying they will leave the euro and the actual realities and impact of doing it are two very different things. Not dissimilar to the dawning realities of the Scottish referendum for the UK - with the oil price having plummeted since then that would now be looking like a very dubious decision.
The snap election occurs on 25 January and so Mario Draghi may await the outcome before announcing any further stimulus measures but the economic malaise is also affecting other countries and so a more wide-ranging proposal may emerge before then.
If the electoral outcome requires a coalition to be formed, that will cause further confusion. A weak euro is probably the only factor we feel relatively confident in forecasting.
Guy Stephens is a director at Rowan Dartington Signature. The views expressed are his own.