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* M&S let down by the wrong trousers
* Market leader Tesco squeezes out growth
* John Lewis workers risk missing out on traditional bonus
* Pubs and cinema proving rival attraction for consumers
(Recasts lead, adds chart)
By Sarah Young and Kate Holton
LONDON, Jan 9 (Reuters) - A Christmas crunch inflicted more
pain on British retailers on Thursday, as changing habits and
belt-tightening exposed the industry's struggle to eke out
growth and its slim margin for error.
One of Britain's best known chain stores John Lewis
warned it was one of the "most severe" markets in a
generation, Marks & Spencer's described conditions in
clothing and homeware as "challenging" while Britain's biggest
retailer Tesco said the market was subdued.
Industry data on Thursday showed British shoppers cut back
at the end of 2019, rounding off the worst year since the
mid-1990s for retail sales amid uncertainty over Brexit, last
month's election and slowing wage growth.
Instead of buying goods, consumers opted to spend on
experiences, according to payment card company Barclaycard
showed. Cinema ticket sales were up 19%, while spending in pubs
and on takeaway food rose by about 12%, its data showed.
Adding to the downbeat outlook, Tesco said Prime Minister
Boris Johnson's resounding election victory in December, which
broke the deadlock over Brexit and lifted financial market
sentiment, had not unleashed any pent-up demand.
On Wednesday, Sainsbury's, Britain's second largest
supermarket, said it hadn't seen any change in behaviour since
the nation went to the polls.
The data and lacklustre trading updates from the UK's
best-known stores will underscore concerns that the prolonged
downturn in consumer spending will last longer than feared.
M&S and Tesco highlighted the unforgiving nature of a market
in which retailers have to get the right products available at
exactly the right time in order to find any growth.
M&S saw quarterly underlying UK sales rise for the first
time since 2017, but its festive season was tarnished by basic
mistakes in managing clothes supplies.
Menswear sales suffered because it over-bought skinny and
slim styles in its contemporary ranges, under-bought more
classic fits, and also had too many small sizes and not enough
medium and large ones.
Investors punished the company for the mishap - the stock
was down more than 10%, set for their worst day since late
February 2019.
In an indication of how hard supermarkets had to work over
the holiday period, Tesco cut prices, delivered its
best operational performance in six years and saw its biggest
ever day of UK food sales.
In doing so, it eked out a meagre 0.1% rise in underlying UK
sales over the key Christmas period.
BUSY PUBS
For employee-owned John Lewis Partnership, which runs the
eponymous department stores business and up-market supermarket
Waitrose, the prospect of not paying a bonus for the first time
since 1953 highlights how tough times are for some retailers.
Like rival department stores, John Lewis has been under
pressure for some time, and in March last year reported a 45%
drop in full-year profit, hurt by weak demand and rising costs.
It is not just the big guns suffering, with pain also being
felt among niche players such as British greeting card retailer
Card Factory, which said it expected lower annual
earnings, sending its shares down 17%.
Amid the gloom there have been some bright spots, with
homeware retailer Dunelm forecasting a near 20% jump in
earnings for the first half of its fiscal year, thanks to its
decision not to discount over the holiday season.
Dunelm's more upbeat outlook echoed British clothing
retailer Next, which last week raised its full-year
profit forecast after a better-than-expected Christmas.
And British pub and restaurant operator Mitchells & Butlers
also saw strong festive season sales, as more diners
opted for its pricier healthy menu options.
(Additional reporting by Paul Sandle, James Davey, Tanishaa
Nadkar and Muvija M
Writing by Alexander Smith
Editing by Carmel Crimmins and David Goodman)
