Retail Sales Monitor
Retail Sales Monitor: Sales Beat Expectations Despite Falling Volumes
Helen Dickinson OBE, Chief Executive, BRC:
Retail sales held up better than expected this February, though volumes remained down on last year. While the cost-of-living crisis has made customers increasingly price sensitive, they are still ready to celebrate special occasions. This helped deliver strong sales of fragrance and jewellery for Valentine's Day. Energy-saving appliances also continued to sell well, but the rush for warm coats and boots subsided as the January sales splurge satisfied customer appetite.
The economic backdrop means retailers face volatile trading conditions. Many consumers will be concerned as they prepare for further energy price and tax rises in April. To protect people from ongoing price rises for goods, Government must avoid additional regulatory costs on business that compromise retailers' ability to invest in lowering prices and in other areas that would contribute to the UK’s economic recovery.
Paul Martin, UK Head of Retail, KPMG:
With overall inflation running at around 10%, and food inflation sitting nearer 20%, total sales growth for February of just 5% will be eating hard into retail margins and masking the true state of the sector’s health.
Consumers are continuing to hold back on non-essential spending with sales of clothing, footwear and accessories, which have been very influential in spending for many months, continuing to decline in February. Furniture and homeware have been driving sales growth on the high street and online but we are starting to see more categories record negative sales year on year, as household budgets remain squeezed.
With increases in energy, broadband, mobile phone and council tax bills on the horizon, consumers will continue to take steps to reduce spend where they can - switching where they shop, what they buy, whilst also cutting back on activities, such as eating out and takeaways. As much of the growth in retail is being driven by inflation, price and promotional strategies have become increasingly important growth engines for retailers. Online retailers will also have to review their business models, and there are likely to be some failures in this space, particularly among the businesses that are currently over-valued following the surge in demand during the pandemic which has now decelerated.
The outlook will continue to be challenging with falling consumer spending in real terms and as more people choose to shop by ‘occasion’, retailers will be pulling out the stops for a buoyant Easter and Mothers’ Day.
Food & Drink sector performance, Susan Barratt, CEO, IGD:
Food and drink sales, driven by historically high levels of inflation, grew in February and we’re seeing little sign of food inflation abating yet in 2023. Volume sales continued to decline and events like Valentine’s Day are failing to make a positive impact.
Despite energy prices beginning to fall, the fact that food inflation remains stubbornly high means consumers’ trust and confidence is declining. With food supply chains challenged for fruit and vegetables, food availability concerns among shoppers remain high and fewer shoppers trust the food industry to ensure good availability (61% compared to 70% Feb ’22).
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