Jan 20, 2023
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UK retail sales in surprise drop, but clothing volumes stay positive

Jan 20, 2023

It may have been the key festive shopping month, but the volume of UK retail sales still fell in December, the country’s Office for National Statistics said on Friday. And it added that clothing sales saw a very slight volume uptick.

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The shock drop in the total figure for UK retail was only 1% month-on-month, but in the final month of the so-called Golden Quarter, it was bad news. And coming after a 0.5% drop in November (despite Black Friday), it underlined how tough it is at retail.

Sales volumes were also 1.7% below their pre-coronavirus February 2020 levels.

Worse still, non-food stores sales volumes fell by 2.1% over the month, “with continued feedback from retailers and other wider evidence that consumers are cutting back on spending because of increased prices and affordability concerns”.

But physical stores clearly enjoyed something of a comeback as the proportion of online sales fell to 25.4% in December 2022 from 25.9% in November, with anecdotal evidence that Royal Mail strikes led to consumers shopping in stores more.

Looking at the figures in more detail, the ONS said that while the volume of sales fell 1% compared to the previous month, the value of sales was down 1.2%, despite inflation that was running in double digits.

Compared to a year ago, the volume of December sales was down 5.8% but the value was up 3.8%, although this clearly lagged inflation.

Total non-food stores sales volumes (which means department, clothing, household and other non-food stores) fell by 2.1% on the month. There was “continued feedback from retailers suggesting that consumers are cutting back on spending because of increased prices and affordability concerns”.

And results from the ONS’s own consumer research in early to mid-Decemer found that 60% of adults were planning on cutting back on the amount of money they’d spend on Christmas in 2022 compared with the previous year. The most frequent ways they were planning to do that was buying fewer presents (79%) and buying less expensive presents (73%).

The impact of this was that department stores sales volumes fell by 3.1% in December, from a rise of 2.1% in November. Retailers reported that longer Black Friday sales contributed to the November increase.

That said, Clothing stores sales volumes rose by 1% in December, although the ONS didn’t give a value figure.

Despite clothing being relatively buoyant against other sectors, analysts think this doesn’t mean retailer profits are likely to boom.

Samantha Phillips, Partner at McKinsey & Company, said: “The only store sector to have grown in volume in the last three years is clothing, by 2.2%, [but] that is likely driven by increased promotional activity to carefully manage stock.”

As for online sales, as we’ve seen, the overall volume of retail sales happening online shrank. Year-on-year they were down 8.9% and they dropped 2.9% against the previous month. Department store e-sales fell 2.6% on the year and 0.2% on the month while textile, clothing and footwear stores were down 2.6% and 0.2% on that basis.

And analysts think the December figures are a sign of more tough times to come. 

Cande Cooper, UK retail consulting lead at Deloitte, told us: “December’s festive period marks two consecutive months of retail sales decline in the Golden Quarter. The outlook for the next 12 months remains difficult for both consumers and retailers. While inflation is beyond its expected peak, it will still be one of the drivers behind retail sales value growth, with costs ultimately being passed on to consumers that could negatively impact demand. 

“Many consumers will continue to adopt recessionary behaviours in 2023, including trading down, switching to cheaper stores, repairing or fixing items, and cutting back on non-essential purchases.

“Retailers are navigating an uncertain environment as they continue to manage costs down while simultaneously trying to grow revenues. Those who continue to offer good value and innovative products, coupled with quality customer experience will be most likely to succeed. Personalised and dynamic consumer loyalty schemes will also play a part to attract and retain shoppers on a budget.”

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