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Fears of recession return as retail sales fall
RETAIL sales fell last month, making it the second-worst January since 1995 and raising fears that Britain is poised to return to recession.
According to the latest British Retail Consortium (BRC) data, only January 2010 was worse after food sales slowed sharply following a boost over Christmas.
Like-for-like retail sales fell by 0.3 per cent last month.
In January 2011 they rose by 2.3 per cent, picking up after the snow disruption in December 2010.
Including new space, retail sales rose by 2.1 per cent last month, against a 4.2 per cent increase in January 2011.
The BRC said that on both measures it was the second-worst January since the survey began in 1995.
The trade body blamed a sharp slowdown in food sales as consumers reined in their belts after the Christmas festivities.
Non-food sales were also weaker and the BRC said that any gains were largely driven by widespread heavy discounting in the clearance sales.
Clothing, footwear and homewares sales were worse in January than December, especially for larger purchases, hit by consumer caution.
Internet, mail-order and phone non-food sales growth slowed again after picking up sharply in December. Sales rose 11.3 per cent on a year ago, less than December’s 18.5 per cent gain but similar to the 12.3 per cent increase in January 2011.
Stephen Robertson, director general of the British Retail Consortium, said: “As 2012 gets underway, it’s clear people don’t feel any better about the immediate future than they did 12 months ago.
“Customers parked their worries in December and spent, encouraged by discounts. Now, in the New Year, reality has bitten again as concerns about jobs, wages and household costs reassert themselves.
“Despite consumer confidence improving in January, actual spending shows households concentrating on paying off debt, saving and battening down for another tough year.”
Helen Dickinson, head of retail at KPMG, said that after a stronger than expected December, the latest figures are “rather sobering”.
“The return to negative like-for-like sales reflects the trend seen throughout most of 2011 and is a stark reminder of the challenges facing retailers,” she said.
“The underlying health of the sector remains a key concern, with margins and profits squeezed by the relentless need to discount to generate demand.” She added that many retailers are rethinking their entire business models in “a desperate attempt” to adapt to this low-growth environment.
Joanne Denney-Finch, chief executive of researchers IGD, said: “Consumers are adapting to the era of austerity by being more proactive about securing the best deals.
“Our research shows seven in 10 shoppers now rate promotions as very important when choosing what stores to shop in, while 58 per cent say they bring coupons with them when doing their main grocery shop.”
The BRC said that after saving money and treating themselves over Christmas, food and drink shoppers returned to cautious and careful buying in January, seeking out value and special offers.
New Year healthy-eating resolutions and some milder days helped sales of fresh fruit, vegetables, salads and poultry.
On colder days, demand shifted to warming foods, ready meals, hot drinks and winter vegetables and meats. In clothing, sales growth slowed sharply to near zero after a good December.
Womenswear suffered the most, while men’s and children’s continued to show year-on-year gains, although much smaller than in December.
Clothing sales were largely discount-driven with a consequent hit on margins as people waited for clearance sales, especially when buying big-ticket items such as coats and dresses. Handbags and jewellery were popular clearance buys, to update existing clothes rather than splashing out on a whole new outfit.
ros.snowdon@ypn.co.uk
High street retailers’ warning: Page 6
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