Retail sales held up better than expected this February, although volumes remained down on last year as the cost-of-living crisis makes shoppers increasingly price sensitive.
The figures from BRC-KPMG retail sales monitor show total sales in stores increased 5.2% in annual terms last month, boosted by spending for Valentine’s Day. This was below the 6.7% rise in February 2022, but up on the 4.2% rise in January. However, recent rises are due to high inflation pushing up the value of goods being sold, masking falling sales volumes.
Helen Dickinson, Chief Executive of the BRC, noted that retailers face volatile trading conditions, with consumers concerned about further energy price and tax rises in April.
Ahead of Jeremy Hunt’s budget next week, she said: “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.”
Meanwhile, Paul Martin, UK Head of Retail at KPMG, highlighted that the headline growth figure masked the true state of the sector’s health.
He said: “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.”
Martin added: “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.”
NAM Implications:
- High inflation is masking falling sales volumes.
- As a result, consumers are ‘making do’ instead of replacing big-ticket items.
- This has been happening since the global Financial crisis of 2008.
- See ‘Making Do’ Taking Demand Out of the Market?
- In addition, there are the added pressures of April energy price and tax rises yet to emerge from the Lockdown fallout pipeline.
- Suppliers need to keep in mind that in the current circumstances…
- …anything that can be postponed, will…
