British shoppers defy cost-of-living crisis at Christmas

Britons spent more than expected over Christmas, Next, one of the country's biggest clothing retailers said, in a sign that resilient shoppers helped the High Street dodge a cost-of-living crisis that threatened to hit festive sales.

But a slowdown looms this year, said Next, which warned that British shoppers were set to cut back on spending.

In the run-up to Christmas, however, they opened their wallets. Next's sales grew by almost 5% compared to last year, beating expectations. Discounter B&M and snack chain Greggs also reported higher sales, showing the importance of value in straitened times.

Next's performance lifted British retail stocks on Thursday on hopes that Christmas demand, key to most British retail profits, will be better than expected across the board.

Next was up 8%, while Primark-owner AB Foods rose 3%, clothes and grocery chain Marks & Spencer traded up 5%. JD Sports, online retailer ASOS and electrical retailer Currys were all up about 3%.

Shops at the value end of the scale did even better than Next.

B&M, which sells everything from toys to frozen goods and garden furniture, posted a 6% rise in comparable Christmas sales, and Greggs, whose snacks and coffees are cheaper than many rival cafes, said its sales were up 18% in the period.

However, the resilience would not last into this year, said Next.

It expects sales to fall by 2% in 2023, as shoppers start to react to rising mortgage costs, with more people coming to the end of fixed-price deals, and as they start to realise the impact of higher energy prices on household budgets.

"The retailer expects the real pain to come in 2023," said Mark Crouch, analyst at social investing network eToro.

The spending squeeze is likely to continue to boost chains like B&M.

"The appetite for bargain hunting has increased sharply amid the big cost-of-living squeeze with shoppers flooding into discount stores," said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.