Latest data from the BRC – KPMG Retail Sales Monitor suggests that the consumer spending boom may be losing steam as shoppers adopt a more cautious approach as prices start to rise.
Overall, UK retail sales last month decreased by 0.4% year-on-year, impacted by weakening non-food sales. On a total basis, sales rose 0.4% in February, well below the 3-month average of 0.8% and the 12-month average of 0.9%.
Over the three-months to February, non-food retail sales declined 0.4% on a like-for-like basis and 0.2% on a total basis. This is the first 3-month decline since November 2011, dragging the 12-month total average growth to 0.6%, the lowest since May 2012.
Meanwhile, over the same period, food sales increased 0.6% on a like-for-like basis and 2.0% on a total basis. This is the third consecutive 3-month average total growth of 2% or above, taking the 12-month total average growth to 1.2%, the highest since May 2014.
Helen Dickinson, Chief Executive Of The British Retail Consortium, said the negative distortion created by the later timing of Mother’s Day this year had impacted some non-food categories. However, she added that looking beyond this distortion, the persistent weak sales performance of several non-food categories pointed to an “undeniable trend” of cautious spending on non-essential items.
“Tougher times are expected ahead,” she said. “The impact of inflation on consumer spending will add further intensity to an already fiercely competitive environment in which the ability to adapt and innovate will be key to survival.”
Paul Martin, UK Head Of Retail at KPMG, added that with inflation starting to have an impact on retail performance, it was clear that consumer confidence is showing signs of deteriorating. “Retailers will be paying close attention to the upcoming Spring Budget in the hope of seeing some measures to ease the pressure being placed on margins. For some bricks and mortar retailers, a hike in business rates may well be the straw that breaks the camel’s back,” he said.
Meanwhile, commenting on the food sector, Joanne Denney-Finch, Chief Executive at IGD, said: “Food and grocery turned in a solid sales performance throughout February, with a particularly strong Valentine’s Day this year.
“The return of a little inflation to the aisles is also playing its part and shoppers are bracing themselves for more to come: 81% believe food prices will rise in the coming year, the highest level of anticipation since September 2016. This puts the emphasis back on hunting for value, with 63% of shoppers favouring everyday low prices over more special offers.”