It won't be a wild one this year, but neither should it be. Loyalty is now key, says Clive Black

Santa is cranking up the work rate, with the elves nearing completion of their production runs and the reindeer logistics teams moving into place for final despatch. While discussing Christmas puds with Nick, as we call him, following Northern Foods' results, we also asked him how he sees Christmas 2009 in the UK.

Santa was not happy with the profligate lifestyle of many UK households for much of the 'noughties'. Too much of the elves' work was bought on the never-never; and Santa dislikes Never-neverland. He also has considerable disdain for the financiers and regulators that fuelled conspicuous consumption. So this Christmas is expected to be more sedate than earlier in the decade.

That said, Santa does feel that many folk have learnt some important lessons and so he is sympathetic to household de-leveraging. Accordingly, elf production for the UK is expected to be a bit higher than in 2008, making Christmas 2009 more robust from a demand perspective, aided by weak comparatives from last year's weak performance.

Santa also commented on how savvy UK retailers were with conservative ordering patterns for grown ups. Large stock overhangs are not anticipated; indeed, some stock has been bought specifically for post-Christmas sales. Those retailers that failed last year, such as Woolies, also boost the survivors; there have been mentions of up to £3.5bn of trade being transferred from failed to surviving retailers.

The big man expects the big four food retailers to have sound but not exceptional times in food: inflation is easing, trading up increasing and there is little deep-discounting in festive lines (turkeys have been discounted in October in times past). The trading strategies appear well set, with loyalty a key aspiration in Morrison's £25-of-a-£240-spend deal, Clubcard 2 and Nectar vouchers.

The supermarkets are expected to have a particularly good time in non-food. Each year they gain a larger slice of the Christmas cake through improved ranges, effective event management, high consumer accessibility and advancing supply chains. And with their growing web capabilities, 2009 should be the best yet for the supermarkets.

So, come the New Year, when Santa flies off to stay in the Tooth Fairy's pad in the Caribbean as she looks over the cavity data, we anticipate robust trading updates from the big four in January.

Dr Clive Black is head of research at Shore Capital Stockbrokers.

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