Yahoo Finance Christmas shopping: Retailers pin hope on Black Friday sales and World Cup
Retailers face a "challenging" Christmas shopping period this year, with the health of the sector seeing its biggest "golden quarter decline" since 2011, new research suggests.
The latests assessment by KPMG/Ipsos Retail Think Tank (RTT) members revealed the health of the retail sector is expected to decline by two points to 70 points in the final quarter of this yea
That is a drop in Christmas trading not seen since 2011 where growing uncertainty in the European and global markets kept consumer confidence low, according to the the Retail Health Index (RHI).
The RTT predicts a combination of pressure on margins, rising costs and shaky consumer demand to produce a difficult trading environment in the last three months of 2022 as UK consumers contend with rising energy bills and interest rates.
"The health of the retail sector continues to slowly deteriorate, and it has been over a decade since we have seen a two point drop in the health index during the vital golden quarter," said Paul Martin, head of retail at KPMG in the UK. "It likely that that the usual festive boost won’t be enough this year to counteract the ongoing issues that retailers are facing with rising costs, squeezed margins and fall back in demand."
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According to the report, retailers are anticipated to face particular challenges in October, with the economic and political turmoil yet to "trickle down" to consumers.
Martin added: "Whilst economic and political uncertainty influence the health of the retail sector, it seems that this has yet to fully trickle down to the consumer who will still want to enjoy Christmas, with many choosing to spend on hospitality and enjoying time with friends and family.
"Many will be looking to trade down, search out bargains and purchase less – but Christmas is by no means cancelled – despite the mood music around an impending recession."
But the RTT noted Black Friday sales and the World Cup are expected to boost food sales alongside Christmas gift buying despite the cost of living crisis in November and December.
Read more: Cost of living: How to save money on heating bills this winter
However, sales value growth versus sales volume decline will continue to be an issue for the sector as consumers are buying fewer non-essential items to cover rising food costs, it said.
The continued decline in retail health during the busiest quarter in the industry's calendar, comes on the back of a steady summer period where hot weather saw health in the sector fall by two to 72 points in Q3.
Consumer demand for new clothes in particular, continued to drive sales. Demand and footfall started to fall towards the end of the third quarter — a trend that the RTT expects to continue to the end of the year.
But, things have since changed and households contending with the steepest price rises in 40-years have been forced to curb their spending.
Martin Hayward, founder of Hayward Strategy and Futures, said: "The tills continue to ring on the high street but the baskets of goods going through them are considerably smaller as consumers prioritise essentials, and the biggest priority is food.
"Food and grocery’s share, already the largest share of spend, will increase further because of inflation rather than volumes and we can expect more of household spend to shift to the food sector as the cost-of-living crisis deepens."
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Tuesday's figures come on the back of separate analysis from the Office for National Statistics, which showed that the price of food staples such as pasta, tea, chips and cooking oil has soared over the past year.
The lowest-priced items increased in cost by around 17% over the 12 months to September. That is an increase from 7% in April, and just above the 15% in the official measure of inflation for food and drinks.
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