Fashion and beauty spending in the UK had a lackluster performance in December, according to two reports released on Tuesday. Despite some growth in sales, it was not enough to keep up with inflation.
Barclays reported that total consumer card spending, which includes retail and other sectors, increased by 4.4% in December compared to the previous month. However, this fell far short of the 9.3% rise in consumer price inflation. The British Retail Consortium also noted a similar trend, with non-food retail spending rising by 3.2%.
A closer look at the Barclays figures shows that the 4.4% growth was driven by spending on necessities. As the cold weather set in, consumers prioritized spending on utilities, resulting in a massive 40.6% increase in this category. There was also a rise in holiday bookings, which could bode well for the fashion and beauty sectors in the future as consumers invest in new clothes and beauty products for their trips.
Spending on non-essential items grew by 4.1% in December, marking the highest increase since July. However, this figure included spending in pubs, bars, clubs, and restaurants. When it comes to clothing, there was a modest increase of 1.5%, an improvement from the 3% decline in the previous month but still not enough to make it a stellar Christmas season for fashion retailers. Department stores saw a 2.8% increase in spending compared to a 1.5% decline in November.
Sports and outdoor retailers experienced their largest increase (3.5%) since March 2022, suggesting that Britons may have been purchasing gym wear and equipment during winter sales to kickstart their health and fitness goals for the New Year. However, even this figure did not match inflation.
According to the BRC-KPMG Retail Sales Monitor, total retail sales increased by 6.9% in December (6.5% like-for-like). While this was an improvement from December 2021, it is important to note that inflation was much lower last year compared to the current levels nearing double digits.
The monitor did not provide specific figures for individual categories but revealed the highest and lowest performers. Footwear ranked second, with health and beauty coming in third place. Clothing ranked in seventh place, while jewelry and watches surprisingly ranked eighth, despite their significance as gift items.
Online, footwear ranked fourth, with health and beauty and clothing in sixth and seventh place, respectively.
Paul Martin, UK Head of Retail at KPMG, noted that while sales growth in December appears healthy, the increase is primarily due to higher prices rather than increased volume. He also highlighted that the volume of goods purchased was significantly lower compared to the same period last year.
Helen Dickinson, BRC Chief Executive, acknowledged the challenges faced by retailers throughout the year, including rising inflation and declining consumer confidence. She expressed that the increase in spending over Christmas brought some relief to retailers, particularly in energy-saving products, warm clothing, and boots. However, she emphasized that despite stronger sales, growth remained below inflation, marking the ninth consecutive month of falling volumes.
Retailers can expect further challenges in 2023, as cost pressures show little sign of easing and increasing living costs further constrain consumer spending.
Useful links:
1. BRC-KPMG Retail Sales Monitor
2. Barclays Consumer Spending Report
