Introduction

UK retailers are facing an unprecedented decline in the all-important Q4 sales period as a combination of unique factors come into play. The combination of recession, falling consumer confidence and capacity, and a VAT cut are all having a major impact on consumer retail expenditure. This report forecasts sales and winners per sector, with detailed analysis.

Scope

*Q4 2009 spending trends; clothing & footwear, DIY, electricals, furniture, food & grocery,health & beauty, homewares, other sectors, online sales.

*Value, volume and inflation growth and spend per head in each sector with changes year-on-year.

*Unique survey of UK consumers' attitudes to spending in Q4 2009.

*Trends by value, volume and inflation Q4 2005-2009.

Highlights

For the first time since Verdict's records began in 1989, we forecast retail expenditure will be down this Christmas. We estimate the market will shrink by 0.7% in Q4 2009 equivalent to £535.0m. But this conceals diverse trends in each sector.

As consumer expenditure includes tax, the 2.5 point cut in VAT has been a significant factor in the reduction in spending in non-food (food & grocery is largely VAT free). To maintain sales at last year's level, volume or prices would have to rise but overall both have declined and retailers compete aggressively to win share of a smaller market.

At least one in three consumers intend to cut back on their spending this Christmas, with family shoppers and those on low incomes the most nervous. At least 40.0% of consumers in the south and East Anglia, where the financial crisis has hit the hardest, are considering cutting back.

Reasons to Purchase

*Measure your company's potential share of each sector and focus on most productive outcomes.

*Devise winning strategies to gain share of consumers' spending using unique survey of spending intentions.

*Benchmark your performance against the sector to devise future growth potential.

Overview 1
Introduction 1
SUMMARY 1
Christmas spending down as non-food doubles its drop of Q4 2008 to £1.3bn; 1
VAT cut a significant factor in decline in spending; 1
Exit of casualties has also reduced capacity for others to win; 1
Consumers will be the winners as retailers fight for their custom; 1
Women will stop this being the worst Christmas ever despite their intention to cut back; 1
Online will be the star yet again - despite the postal strike scare; 1
Electricals set to be biggest loser; 1
Not Armageddon, but survival of the fittest. 1
Executive Summary 2
KEY FINDINGS 2
Christmas spending down as non-food doubles its drop of Q4 2008 to £1.3bn 2
VAT cut a significant factor in decline in spending 2
Exit of casualties has also reduced capacity for others to win 2
Consumers will be the winners as retailers fight for their custom 2
Women will stop this being the worst Christmas ever despite their intention to cut back 2
Online will be the star yet again - despite the postal strike scare 3
Electricals set to be biggest loser 3
Not Armageddon, but survival of the fittest 3
4
Table of figures 5
Table of tables 6
Analysis 7
Spending set to fall as unique factors take effect 7
Christmas 2009 headlines - expenditure falls for first time, but not retail Armageddon 8
Consumers - intending to cut back on expenditure and being more selective 13
Sector performance - only two show growth 17
Clothing & footwear - time for a new party dress 21
DIY & gardening - wrong time to move house 23
Electricals - little sparkle in the market 25
Food & grocery - we all have to eat, especially at Christmas 27
Furniture & floorcoverings - not a priority for consumers nervous about spending 29
Health & Beauty - looking and feeling good still a priority 31
Homewares - pretty up the house for visitors 33
Other sectors 35
- Toys 35
- Books, music & video 35
- Jewellery 35
- Others 35
Online - the saviour 36
APPENDIX 37
Methodology 37
Further reading 38
Ask the analyst 38
Verdict consulting 38
Disclaimer 39

List of Tables
Table 1: Spending intentions by age group for Christmas 2009 15
Table 2: Estimated expenditure, growth rates and year-on-year change in value by sector Q4 2009 17
Table 3: Estimated Y-o-Y change % in sector expenditure by value, volume and inflation Q4 2009e 17
Table 4: Clothing & footwear expenditure summary Q4 2009e 21
Table 5: DIY & gardening expenditure summary Q4 2009e 23
Table 6: Electricals summary expenditure Q4 2009e 25
Table 7: Food & grocery expenditure summary Q4 2009e 27
Table 8: Furniture & floorcoverings expenditure summary Q4 2009e 29
Table 9: Health & beauty expenditure sector summary Q4 2009e 31
Table 10: Homewares expenditure summary Q4 2009e 33
Table 11: Online summary Q4 2009e 36

List of Figures
Figure 1: Summary of spending trends Christmas 2009 7
Figure 2: UK retail growth by quarter 2009e 8
Figure 3: Value change in retail expenditure Q4 2009e 9
Figure 4: Total spend and growth year-on-year in UK retail Q4 2009e 10
Figure 5: Y-o-Y change % in volume, inflation and value sales Q4 2005-2009e 11
Figure 6: Sector share of expenditure Q4 2009e 12
Figure 7: Spending intentions by gender for Christmas 2009 13
Figure 8: Spending intentions of UK population at Christmas 2009 14
Figure 9: Spending intentions by social class for Christmas 2009 14
Figure 10: Percentage of population by UK region intending to spend less at Christmas 2009 16
Figure 11: Major sector performance - value growth Q4 2009e 18
Figure 12: Major sector performance - volume growth Q4 2009e 19
Figure 13: Major sector performance - inflation/deflation Q4 2009e 20
Figure 14: Clothing & footwear expenditure growth trends vs non-food Q4 2009e 22
Figure 15: DIY & gardening expenditure growth trends vs non-food Q4 2009e 24
Figure 16: Electricals expenditure growth trends vs non-food Q4 2009e 26
Figure 17: Food & grocery expenditure growth trends vs non-food Q4 2009e 28
Figure 18: Furniture & floorcoverings expenditure growth trends vs non-food Q4 2009e 30
Figure 19: Health & beauty expenditure growth trends vs non-food Q4 2009e 32
Figure 20: Homewares growth expenditure trends vs non-food Q4 2009e 34
Figure 21: Forecasting methodology 37