February sees disappointing retail sales

Retail sales in February increased by just 0.6 per cent on a like-for-like basis from a year earlier.

Commenting on figures from the latest BRC-KPMG Retail Sales Monitor, British Retail Consortium chief executive Helen Dickinson said: “The headwinds to retail spending continued to blow strong in February. Inflation is still eating into shoppers’ budgets, pushing them to spend a greater share of their income on essentials and leaving less left over to buy discretionary, predominantly non-food, retail items. At the same time, weak growth in household earnings is keeping overall sales low.”

On a total basis, sales rose by 1.6 per cent in February, compared with a growth of 0.4 per cent in February 2017. But in the three months to February, in-store sales of non-food items declined by 2.4 per cent on a total basis and 3.3 per cent on a like-for-like basis. Over a 12-month period the total decline was 2.2 per cent.

In the past three months, non-food retail sales in the UK decreased by 1.1 per cent on a like-for-like basis and 0.5 per cent on a total basis.

Paul Martin, head of retail, KPMG, commented: “Retailers experiencing any growth in this environment will be counting themselves lucky. Indeed, total growth of 1.6 per cent in February is quite an achievement in such testing times.”

Online sales continued to grow, with non-food sales up 6.4 per cent in February. However, this was down on the eight per cent growth seen in February 2017, reflecting an underlying slowdown.

The online penetration rate increased from 20.5 per cent in February 2017 to 21.1 per cent in February 2018.

The BRC’s Ms Dickinson added: “There’s little sign that consumer confidence, rather than financial reality, has much to do with the current weakness in spending. Furniture, often considered the bellwether of consumer confidence, actually saw sales improve in February, as shoppers took advantage of credit facilities offered by retailers. The fact is that consumers want to spend, they just don’t have the resources to do so.

“With the upward pressure on prices from the fall in the pound now starting to subside, we expect to see some loosening of the squeeze on spending on non-essentials, but it’s likely to come slowly. And so are anticipated increases in wage growth. Crucial for consumers and retailers over the coming months will be a successful outcome to trade negotiations, ensuring that amid the current difficulties, they won’t be facing further increases in costs from new tariffs on the everyday goods we import from the EU.”

KPMG’s Mr Martin said: “Softening consumer demand, rising costs for retailers and, of course, the ongoing structural changes within the industry are creating the perfect storm which is uprooting the weakest players.

“On the high street, it was grocery sales that continued to pull it out of the bag. Meanwhile, Shrove Tuesday may have resulted in an uptick in cooking accessory sales, but performance in non-food in general was once again disappointing.

“Online retail appeared to have fared better – with growth across all categories – but the latest figures reinforce an underlying trend of a slow-down in growth online, which prompts concern.

“The retail shakeout will gather further momentum in the coming months, and retailers with large physical store estates are particularly under pressure. Moreover, the cost of one of the coldest winters on record has yet to be factored in. It’s not all doom and gloom though, a number of retailers are bucking the overall trend by focusing on a differentiated proposition while remaining relevant to the customer.”