Retail sales disappointed in the UK last month as Britons facing higher household bills reined in their spending after splurging on Christmas festivities.
(Bloomberg) — Retail sales disappointed in the UK last month as Britons facing higher household bills reined in their spending after splurging on Christmas festivities.
Total retail sales rose by 4.2% year-on-year in January, around half the pace in December and down from 11.9% growth a year earlier, the British Retail Consortium and consultancy KPMG said in a report Tuesday. High inflation means that the rise in sales masked a much larger drop in volumes as shoppers get less for their money.
The highest inflation in decades is weighing on retailers’ margins as they attempt to shield shoppers from the full impact of cost rises. Many stores reported better-than-expected sales over Christmas, but now consumers are battling higher household bills and more expensive mortgages as interest rates rise, leaving little money in hand for shopping.
“With ongoing cost pressures and labor shortages, increases in sales don’t convert into increases in profits or cash,” said Helen Dickinson, Chief Executive Officer at the BRC. “As Christmas cheer subsided, retailers felt the January blues.”
Consumers chose cheaper big-ticket items skipping the premium category and also opted for energy-efficient appliances like air fryers to help bring down their bills. In clothing, the strongest categories were men’s outfits and shoes.
Online purchases were particularly hit with non-food sales on the web dropping 3.6% in January amid a revival of bricks and mortar shopping after the pandemic. Online retailers also lost out in the run-up to Christmas, with sales falling at fast fashion houses Asos Plc and Boohoo Group Plc while online beauty and nutrition firm THG Plc cut its profit guidance.
“Consumers have started the year with a tight rein on spending as they face another period of rising costs,” said Paul Martin, UK head of retail at KPMG.
For some retailers, the combination of weaker consumer sentiment and higher input costs is proving too much. Stationery chain Paperchase will likely close around 100 stores in the UK after the company filed for insolvency last week and Tesco Plc stepped in to buy the brand and intellectual property.
It follows collapses last year from fashion chain Joules and furniture retailer Made.com, both of which were bought by Next Plc.
“It is likely we will continue to see casualties both online and on the high street this year,” said KPMG’s Martin.
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