Fashion clearance sales have provided a much-needed boost to the UK retail sector in January. Despite cautious consumer spending, the fashion industry has experienced growth, thanks to easy comparisons, high inflation, and clearance sales. Reports from Barclays and the British Retail Consortium-KPMG show that while consumers are still willing to spend, they are not in the mood to splurge.
Barclays’ report focuses on overall consumer card spending. The total spend figure increased by 9.7%, surpassing December’s 4.4% and slightly exceeding the 9.2% inflation rate. However, this growth was artificially inflated by the weak January 2022 comparison, when restrictions were in place due to the Omicron variant.
The figures were also boosted by a 44.7% increase in spending on utilities, marking the highest growth rate since Barclays began tracking this data in April 2022. Non-essential items saw a 10.4% increase, with the retail sector benefitting from this upward trend. The hospitality and travel industries also witnessed noticeable growth, once again due to the comparison with the heavily impacted January of the previous year. Increased travel and socializing likely contributed to growth in the fashion and beauty sectors. However, clothing stores only experienced a 3.6% growth in value, while department stores saw an 8.3% increase. Pharmacy, health, and beauty retailers performed well, recording their largest increase since April 2022, indicating a return to normalcy after the subdued demand caused by the Plan B restrictions in 2022.
The BRC-KPMG figures unveiled that the rise in sales masked a larger drop in volumes once inflation was accounted for. Specifically examining retail sales, total retail sales in the UK rose by 4.2% in January, below the three-month average growth of 5.2%. Like-for-like retail sales increased by 3.9%. Non-food sales experienced a lesser rise of 2.9%, and online non-food sales actually fell by 3.6%. The penetration rate of online non-food items decreased to 41.8% in January, down from 44.6% in January 2022.
Within the non-food category, footwear saw particularly strong growth, as did clothing and health & beauty. However, e-sales of clothing and health & beauty fell despite the overall increase. Paul Martin, UK Head of Retail at KPMG, highlighted that consumers are tightening their spending due to rising costs. He added that sales of clothing continue to support the high street, with men’s clothing and shoes being the strongest categories in January.
Although the January sales reports may not be overwhelmingly positive, the growth in the fashion sector indicates that consumers are still willing to spend, albeit cautiously. Despite challenges such as inflation and restricted volumes, the industry remains resilient. As the year progresses, it will be interesting to observe how consumer spending patterns evolve and how retailers adapt to meet changing demands.
Sources:
1. Barclays Report: Barclays Retail Sales Update
2. BRC-KPMG Report: BRC-KPMG Retail Sales January 2023
