Yahoo Finance Shopping lifts UK retail sales in January but 'challenging months' ahead
Britain's retail sector experienced a New Year boost as sales increased in January, despite rising inflation.
According to the British Retail Consortium (BRC) and KPMG Retail Sales Monitor, sales rose by 11.9% in January, against a decline of 1.3% in January last year.
This was above the 3-month average growth of 6% and the 12-month average growth of 10.9%.
Total retail sales grew 7.5% on a two-year basis (Yo2Y) during January compared with the same month in 2020.
UK retail sales increased 8.1% on a like-for-like (LFL) basis from January 2021, when they had increased 7.1%. This was above the 3-month average growth of 3.3% and below the 12-month average growth of 9%.
Meanwhile, food sales decreased 0.1% on a total basis and 0.5% on a like-for-like basis over the three months to January — below the 12-month total average growth of 2.4%.
Food sales were in decline year-on-year for the single month of January.
Non-Food retail sales increased by 11.1% on a total basis and by 6.5% on an LFL basis over the quarter to January. This was below the 12-month total average growth of 18.0%. However it was in growth for the single month of January.
Helen Dickinson OBE, chief executive of BRC, said: "It is encouraging to see such strong sales in January, even once inflation has been accounted for. Food sales were more muted than in previous months, as people went back to eating out more often. Consumers prioritised home purchases, boosting the sale of household appliances, electronics and homeware. In what may be signs of a return to pre-pandemic trends, furniture was the stand-out performer in January, after transport delays in the Christmas period began to ease.
"Retailers and consumers face challenges in the coming months. Retailers face competition from other spending opportunities as the public flood back to restaurants, cafes and live events. Furthermore, rising inflation, driven by higher costs of production, higher energy and transport prices, as well as other looming price hikes this Spring will mean consumers will have to tighten their purse strings."
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Over the three months to January, in-store sales of non-food items grew 67.6% on a total basis and 54% on an LFL basis. This was above the total 12-month average growth of 51.1%.
According to the report in-store sales of non-food items declined 7.5% (Yo2Y) on a total basis over the three months to January. This was worse than the 2019 total average decline of 3.1%.
Online sales were down across all categories when compared to January last year, with items for the home seeing the biggest drop in sales volumes.
Online non-food sales fell by 24.2% during January, compared with growth of 83% in January 2021 — a further fall from the 3-month decline of 18.3%. On a two-year comparison, online non-food sales increased by 31.8% in January. This is above the 3-moth average increase of 24.8%.
Figures also show that the non-food online penetration rate decreased to 41.5% in January from 66.2% in January the year prior. But, this was up 10.3 percentage points on the 31.2% seen at the same point in 2020.
"Retailers will be relieved that we started the year without further lockdowns as consumer demand continued strongly on the high street with sales up 11.9% on last year," said Paul Martin, UK head of retail at KPMG. "However, this unusually strong performance for January which is traditionally a slower month, should be put in the context of last year’s lockdown restrictions."
“Footwear, furniture and jewellery saw strong sales growth in stores whilst spending on food and drink, toys and computing all fell during January," Martin added.
Martin anticipates with COVID restrictions eased and workers heading back to offices that retailers will be hoping consumer confidence "remains robust" to help offset the rising cost challenges. He warns there could be "challenging few months" ahead if "wider macroeconomic conditions start to squeeze household incomes" forcing them to cut back on retail spending.
Susan Barratt CEO at IGD, said: “Following the respite of Christmas celebrations, the new year has brought increased shopper anxiety and IGD’s Shopper Confidence Index reached its lowest level since the index started in 2013.
"With the cost of living rising at its fastest rate in 30 years, our ShopperVista insight reveals that 89% of shoppers expect food to get more expensive in the year ahead. Coupled with the energy price cap set to rise sharply from April, some 39% of shoppers expect to be worse off financially in the year ahead, up 8% from last month. Therefore, we can expect more shoppers to increasingly focus on tightening their spending in the months ahead.”
