Outlook continues to present challenges for retail

In a bout of not-particularly-investigative journalism, I set Tesco a mystery shopper challenge last week, ordering a hefty shop be delivered to my home just as the heaviest snow was due to fall.
Right on time two cheerful chaps showed up without even a word of complaint about the weather. Impressive.

We’ll have to wait until tomorrow for Tesco’s numbers (and my snow-shop experiment won’t register for several more months) but in the meantime we have heard from several other retailers who proved that forecasts of the non-weather variety are key.

Earnings have looked pretty strong for the likes of Next, J Sainsbury and Marks & Spencer, but the shares of Next and Marks suffered horribly at the hands of the dreaded cautious outlook.

When CNBC spoke to M&S’ CFO Ian Dyson, he voiced concerns about UK unemployment this year and the end of the VAT holiday, adding that the company remains focussed on cutting costs. But that was the theme of the past two earnings seasons and the question now is how much more can costs possibly be cut.

Meanwhile, Next explicitly cautioned against reading too much into strong sales in the last weeks of 2009, pointing out we shouldn’t bank on that trend continuing this year.

Sainsbury’s, though, reported sales for the quarter up a better-than-expected 4.2 per cent, plus signs of a return towards high-end foods, and John Lewis reported its best ever Christmas trading. In an upbeat statement, low-cost fashion chain New Look told us its like-for-like sales have gained 5.9 per cent and said it is optimistic enough that it plans to double the size of its stores in the long term.

Despite a few signs of optimism, it looks like UK growth is set to remain sluggish and the big retailers will have to carry on battling it out for market share. It will get interesting when sales start to pick up. Who will be in the strongest position to move back into growth mode after this downturn?

Finally, I’d just like to point out, in case my boss is reading, that I didn’t put my Tesco shopping on expenses, nor am I limiting the experiment to one retailer. Come the next flood, earthquake or plague of locusts I shall put the other retailers to the test. Beware.

Rebecca Meehan co-anchors Capital Connection and is a presenter on Squawk Box Europe each weekday on CNBC.