Shop prices tumble but profits fall

Shop prices fell at their fastest rate for at least seven years last month as high street shops and supermarkets resorted to aggressive discounting.

The British Retail Consortium (BRC) hailed a “double whammy of good news for cash-conscious customers” after overall shop prices fell by 0.8 per cent, dropping for the eighth consecutive month and at the fastest pace since its survey began in December 2006.

Households were offered some welcome respite as food price inflation slowed to its lowest level for more than three years – at 1.7 per cent – while widespread discounting saw non-food prices fall by 2.3 per cent, according to the figures from the BRC and Nielsen.

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Mike Watkins, head of retail and business insight at Nielsen, said: “With the continuation of price cuts and promotions across all of retailing, and with many shoppers holding back on shopping to the last week, there will have been bargains and some great savings for the savvy Christmas shopper.”

But plunging prices are likely to have taken their toll on many retailers, with food chains in particular expected to have seen their profits hit. The BRC said weak sales in the lead-up to Christmas led to higher than normal promotional activity as retailers fought over market share.

Debenhams last week issued a profits warning after disappointing festive sales forced it to slash prices, while Marks & Spencer also launched a major sale with reductions of 30 per cent.

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