Optimism, but clouds ahead

There was a clutch of stock market updates by major UK retailers last week, with Asda unveiling a £150m price war ahead of Christmas and Tesco following up by saying that it planned to save shoppers £250m. Some City analysts talked in terms of “cut throat” tactics; others suggested shoppers would be hard put to spot the difference.

Sainsbury declared excellent first half sales and profits. In the detail they said that one in three sales were of items on promotion, which was largely funded by suppliers. The owners of Waitrose talked optimistically about Christmas and thanked Marks & Spencer for mentioning its Essentials range in its advertising, which had helped sales.

Overall, the message was slightly upbeat. However, Asda warned of a “few frosty moments” ahead. So too, did Sainsbury. And the message from Wal-Mart in the US was that shoppers “continue to tell us they’re concerned about their own finances and unemployment.”

What are the analysts thinking? Big stores did well out of food price inflation but that has disappeared. Tax rises are on the way. Electrical prices are falling. Shoppers are nervous.

All of which means that you need to be cautious about 2010 as shoppers are most likely to be keeping a lid on spending. If you are benefiting from trends towards shopping local, buying small affordable treats and home entertaining, then this is likely to continue.