Essential reading for retailers and suppliers in the home improvement market

Tough trading continued in January

Published: 9 February 2018 - Fiona Garcia
 

UK retail sales increased 1.4% last month in line with the year’s average but non-food categories, including big-ticket, struggled and posted declines against a “challenging backdrop”.

On a total basis, sales rose 1.4% in January, against a growth of 0.1% in January 2017. This is roughly in line with the 3-month and 12-month averages of 1.5% and 1.6% respectively, according to the latest BRC-KPMG Retail Sales Monitor.

However, over the three months to January, non-food retail sales in the UK decreased 1.2% on a like-for-like basis and 0.6% on a total basis. This is below the 12-month total average decrease of 0.1%, marking the first 12-month average decrease since September 2009.

Food sales increased above the average during this period, inflated by rising food prices.

British Retail Consortium (BRC) chief executive Helen Dickinson OBE said of the figures: “The persisting tough trading environment played out at the start of the year with a mixed set of trading updates and subsequent announcements. Sales, as well as profits, are seemingly harder to come by. Against this challenging back-drop, 2018 didn’t have a bad start during what is traditionally a lean month, with sales creeping up in-line with the year’s average.

“The figures paint the same old picture of divided fortunes for food and non-food sales. Rising food prices continued to inflate sales growth and absorb the lion’s share of shoppers’ squeezed budgets, while sales of non-food items struggled in January, dragging the 12- month average into negative territory for the first time in nine years.”

In-store sales of non-food items declined 2.9% on a total basis and 3.6% on a like-for-like basis. On a 12-month basis, the total decline was 2.3%. Despite a growth of 5.3%, sales of online non-food products in January, the figure was still below the three-month and 12-month averages of 6.6% and 7.8% respectively. Online penetration rate increased from 21.9% in January 2017 to 22.2% in January 2018.

Clothing was the only non-food category to buck the winter trend. Ms Dickinson explained: “Some retailers were able to scale back promotions, having shifted more of their stock during the festive sales than last year, and saw encouraging early demand for their new season ranges.”

KPMG head of retail Paul Martin said: “January typically presents retailers with a tough gig persuading shoppers to spend in what is a cash-strapped month for most. With that in mind, 1.4% growth – or 0.6% on a like-for-like basis – has to be seen as a success, albeit food sales continue to be the driver of this growth.

“There was little growth in most categories besides food. Bigger-ticket items, such as furniture, traditionally rely on strong post-Christmas trade but, this year, seem to have struggled to woo consumers with the lure of a sale sign in the window.”

He added: “With Christmas reporting now behind us, the true financial health of the industry comes into focus. For many retailers, online sales have taken the sting out of the challenging trading environment. It’s therefore not surprising to see many retailers rethink their physical presence. Ensuring you can deliver a customer-centric and channel agnostic proposition will increasingly split the winners from the losers in 2018.”

Ms Dickinson concluded that conditions remain “bumpy”, as consumers continues to see wages fall in real terms and she is keen that the ongoing Brexit negotiations result in a more stable environment for retailers and consumers alike. “Although inflation will ease a bit this year these pressures will remain,” she said. “So, to ensure no more pain is added to household budgets, we want to see our Brexit negotiators focus on delivering the terms of the transition to provide businesses and consumers with some much needed certainty.”

 

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