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Last Updated: Tuesday, 10 January 2006, 00:00 GMT
Christmas sales beat expectations
Christmas shoppers on Oxford Street in London
Sales picked up strongly in the week before Christmas
Widespread discounting and big demand for party foods and alcohol led to a surprise surge in festive retail sales, says the British Retail Consortium.

The BRC said like-for-like sales - which strip out the effects of store openings and closures - in December were 2.6% higher than a year earlier.

It was the best December for retailers since 2001.

But the BRC said trade dropped off markedly after the first two days of the post-Christmas sales.

Uphill struggle

The better-than-expected December figures helped to lift the three-month sales trend back into positive territory, with like-for-like activity between October and December up by 0.2%.

"This result was on the high side of our expectations," said BRC director-general Kevin Hawkins.

He said the December sales rise was largely driven by food and drink sales and clever discounting, rather than blanket sales to shift stock.

"The prizes go to those retailers who do enough to get the customers in, without shredding their margins."

He said the first quarter of 2006 would be a tough one for his members, who had to deal with lower sales volumes but high costs through factors such as property rents and business rates.

A "Sale" sign in a shop window
Christmas sales were driven heavily by discounts
Winners and losers

"I would be amazed if no more retailers went to the wall or got taken over.

"The winners and losers will become obvious in the trading updates we see over the next few weeks."

Mr Hawkins said he expected to see a continued turnaround in the fortunes of Marks & Spencer and Sainsbury's, and further troubles for fashion retailers French Connection and Laura Ashley.

He predicted a gentle rise in like-for-like sales growth through most of 2006, as long as there was a cut in interest rates, a stable housing market and no big increases in sudden tax rates.

His cautious optimism was not shared by others in the industry.

"We think 2006 will probably be worse than 2005, at best no better," said Richard Ratner, senior retail analyst at investment bank Seymour Pierce.

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