James Davey and Paul Sandle

LONDON (Reuters) – A desire by British shoppers to celebrate Christmas at home spurred Tesco (OTC:) and Marks & Spencer (OTC:) to the top of the festive retail pile, with demand for premium food, wine and champagne helping both to upgrade profit forecasts.

In the days leading to Christmas, the rapid spread of Omicron coronavirus in many restaurants and pubs left them empty. Instead, shoppers turned to the grocery aisles for small groups to entertain at home.

While the country’s biggest supermarket Tesco sold more than 8 million bottles of champagne and sparkling wine, pubs group Mitchells & Butlers said their sales fell 10.2% in the four weeks over Christmas compared with pre-pandemic trading.

The fast fashion market was under pressure as well. ASOS (LON) reported that although its forecasts were downgraded, sales had not been affected by supply chain and demand volatility.

Ken Murphy, Tesco’s boss, stated that the company had made more investments to ensure delivery during Omicron-generated labour shortages. Additionally higher freight prices have impacted deliveries.

His statement was that this put him in a good position to serve customers as COVID-19 once more led to an increased focus on home celebrations.

M&S, Britain’s most famous stores group which is recovering from a decade of decline, said food sales increased 12.4% against its pre-pandemic performance two years ago in the 13 weeks to Jan. 1, while clothing and home sales rose 3.2%. Both sales were higher than anticipated.

TOUGHER TIME AHEAD

Next Clothing, an English clothing retailer, was the first to publish results this week that revealed that consumers wanted more than they expected.

Since then, furniture, sportingwear and supermarkets have all reported high Christmas sales. However, almost everyone warns that 2022 will prove difficult as British consumers face increased energy costs and inflation.

Next and ASOS both warned they have introduced price increases to offset rising cost inflation due to wage rises and freight rises. Aldi, a German discount supermarket chain, and Lidl in the United Kingdom have both stated they will maintain their lowest prices to continue to increase pressure on this sector.

Official economic surveys have shown that consumers spent well up to December 31, but some Britons managed to save cash working at home. They are expected to cut back on spending when the cost of living rises in 2022.

Shares in Tesco and M&S both slipped in early trading, as they had been expected to upgrade forecasts. ASOS shares rose 6% following its announcement that it will move to the main stock exchange listing. This would allow it to expand its potential shareholder base.