UK retail saw unexpected growth in February, defying expectations and providing a glimmer of hope for the industry. This surge in sales can be attributed to “unseasonal discounting,” which encouraged consumers to spend more than usual for that time of year. However, experts warn that mid-level retailers may struggle in the coming months, while premium and value-focused retailers are expected to thrive.
According to the latest BDO High Street Sales Tracker (HSST), total like-for-like sales in the UK increased by almost 50% compared to the previous year, marking the 12th consecutive month of sales growth. It’s worth noting that non-store sales declined significantly for the second consecutive month, signaling potential challenges for both online and physical retailers in the future as consumers prioritize value.
In February, total non-store like-for-like sales dropped by 19.4%, the largest decline ever recorded by BDO. However, it is important to consider that non-store sales were exceptionally high (+167.3%) a year ago, making the current decline appear more dramatic. Despite this, all sectors saw significant increases in like-for-like sales compared to February 2021. Fashion particularly stood out with a 68.1% increase in total like-for-like sales.
Sophie Michael, Head of Retail and Wholesale at BDO LLP, commented on the findings, noting that although the cost-of-living crisis is gaining momentum, its full impact on consumers has not yet been felt. The upcoming increases in energy prices and National Insurance in April may lead to a decrease in discretionary spending, which has been a driving force behind recent strong sales. Additionally, retailers will face the challenge of higher costs and the decision of whether to absorb them or pass them on to consumers in a time when consumer budgets are being squeezed.
As the cost of living rises, some consumers may adjust their shopping habits and seek more affordable products to stretch their finances. However, there is also expected to be continued demand for premium products. This could further pressure mid-level retailers who may struggle to lower their prices.
Moreover, consumer confidence is plummeting, painting a bleak outlook for retailers in the next six months. To remain competitive, retailers will need to focus on offering the right products and differentiating themselves from the competition. Managing inventory levels and pricing strategies will also be crucial as retailers navigate higher operational costs and fluctuating consumer demand.
In conclusion, while the UK retail industry experienced strong sales growth in February, mid-level retailers are expected to face challenges ahead. The changing economic landscape, rising costs, and evolving consumer preferences will require retailers to adapt and strategize in order to remain successful in the coming months.
Useful links:
1. Retail Gazette
2. British Retail Consortium
