Official figures show that retailers in the UK experienced a fall in sales volumes last month after supermarkets and other food stores had their worst Christmas since 2013.
The Office for National Statistics (ONS) said sales volumes fell 0.3% month-on-month in December, following a small rise of 0.1% in November. Economists had expected volumes to grow 0.4% over the crucial festive period, but overall trading proved to be weak this year despite some recent positive updates from retailers such as Tesco, Sainsbury’s, Superdrug, M&S, and Next.
The data showed the decline in December sales volumes was led by food stores, and in particular supermarkets, where volumes dropped by 1.9% month-on-month to their lowest level in more than a decade. Volumes also fell in specialist retailers, such as butchers and bakers, and alcohol and tobacco stores, including vape shops.
This fall was partly offset by a rise in non-food stores sales volumes, which increased by 1.1% over the month. Clothing stores had the largest upward contribution, rising by 4.4% in December, rebounding from falls in the previous two months. Department stores and household goods stores also rose over the month, which retailers attributed to stronger Christmas sales.
Meanwhile, overall sales volumes across the so-called ‘golden quarter’, when many high street retailers make the bulk of their annual profits, fell by 0.8% compared with the July to September period. However, they were up by 1.9% when compared with the same quarter in 2023.
Alex Kerr, UK economist at Capital Economics, said the worse-than-expected sales figures were “further evidence that the economy had very little momentum at the end of last year”.
But he added: “Although the economy clearly struggled at the end of last year, we doubt that will last.”
Elliott Jordan-Doak, senior UK economist at Pantheon Macroeconomics, also suggested he expected “sales to improve in the new year”.
Meanwhile, Nicholas Found, Head of Commercial Content at Retail Economics, noted that the retailers that outperformed were nimble in response to demand and invested in their omnichannel operations.
He added: “With retailers typically operating on low single-digit margins, weak growth leaves little room for manoeuvre as employer tax increases loom. This will inevitably widen the gap between retailers who can invest in operational resilience and those that cannot afford to – risking higher prices, hiring freezes and store closures.”
NAM Implications:
- Given store profitability dependence on sales volume.
- Together with anticipation of yet-to-be-felt Autumn Budget tax increases…
- …on an already jittery public…
- …the drop in food sales volumes should not be surprising.
- And despite reassurances, market uncertainties will continue…
