European retailers to up YoY Q4 2024 sales by average 2-3%: S&P Global

This year’s Q4 will be crucial for European retailers' prospects for 2025, according to the rating agency, which recently said retailers' hits and misses this festive trading season will not only determine their financial performance for the current fiscal, but will also shape their strategies, operating plans and investment budgets for the next.

Q4 is called the golden quarter as it can account for as much as a third of sales and up to half of the annual profits of retailers of discretionary products, including apparel. According to the British Retail Consortium (BRC), one-third of consumers plan to take advantage of offers on Black Friday and Cyber Monday this year.

However, the rating agency expects sales growth to considerably vary between individual players, given the wide range of business models and market positions among rated retailers in Europe. This season, it expects that retailers will substantially increase promotions to boost volumes as unit prices remain elevated.

One-quarter of rated European retailers have either weak or vulnerable business risk profiles and over one-third have highly leveraged financial risk profiles.

These retailers' ability to protect their earnings and free cash generation will be tested as competitive trends continue to intensify due to the proliferation of e-commerce-based marketplace offerings while consumers remain highly price-sensitive, S&P Global said in a release.

Moreover, many European retailers face higher capital expenditure requirements to upgrade their stores and omni-channel offerings, having moderated their spending over the past three years to preserve cash, while the cost of renovations has increased substantially.

While e-commerce and mobile commerce will remain the main engines of growth, S&P Global anticipates that bricks-and-mortar stores will see a resurgence in footfall this festive season as consumers seek a more immersive in-store experience.

All retailers and their suppliers will need to carefully coordinate and calibrate their stock levels and the timing of their promotions, it said.

Although inflation has moderated, higher wages will continue to constrain the recovery in many retailers' profit margins, it added.

Fibre2Fashion News Desk (DS)