Christmas cheer gives way to January blues

Covering the four weeks 1 – 28 January 2023

• UK Total retail sales increased by 4.2% in January, against an increase of 11.9% in January 2022. This is below the 3-month average growth of 5.2% and above the 12-month average growth of 2.5%.

• UK Like-for-like retail sales increased by 3.9% in January, against an increase of 11.9% in January 2022. This was below the 3-month average growth of 4.9% and above the 12-month average growth of 1.5%.

• Food sales increased 8.0% on a Total basis and 7.9% on a Like-for-like basis over the three months to January. This is above the 12-month Total average growth of 3.5%. For the month of January, Food was in growth year-on-year.

• Non-food sales increased 2.9% on a Total basis and 2.5% on a like-for-like basis over the three-months to January. This is above the 12-month Total average growth of 1.6%. For the month of January, Non-Food was in growth year-on-year.

• Over the three months to January, Instore Non-Food sales increased 7.2% on a Total basis and 6.5% on a Like-for-like basis since January 2022. This is below the 12-month growth of 17.4%.

• Online Non-Food sales decreased by 3.6% in January, against a decline of 24.2% in January 2022. This is below the 3-month average decline of 2.4% and above the 12-month decline of 9.7%.

• The proportion of Non-Food items bought online (penetration rate) decreased to 41.8% in January from 44.6% in January 2022.

Helen Dickinson OBE, Chief Executive | British Retail Consortium
“As Christmas cheer subsided, retailers felt the January blues as sales growth slowed. Many retailers discounted heavily to entice consumer spend, and while there were bargains to be had in the January sales, retailers continue to be hit by lower margins and falling volumes. Own brand ranges remain popular across food and non-food products, and big ticket items are seeing customers trade down.

“The coming months will continue to be challenging for retailers and their customers. Consumer confidence remains stubbornly low and looming rises in household bills and mortgages mean discretionary spending will remain weak. With ongoing cost pressures and labour shortages increases in sales don’t convert into increases in profits or cash. Given that backdrop, retailers can ill-afford the millions lost to the inflexibilities of the Apprenticeship Levy, so Government must urgently look to change the system so retailers can use the funds to train their workforce to better meet the needs of their businesses and the people who work in them.”

Paul Martin, UK Head of Retail | KPMG
“With inflation running at around 10%, sales growth for January nearly halved in comparison to December to just over 4% – sending a clear signal that consumers have started the year with a tight rein on spending as they face another period of rising costs.

“Sales of clothing continued to prop up the high street, with men’s clothes and shoes the strongest category in January, whilst purchases of energy efficient appliances remained a top purchase for consumers.  The decline in sales taking place online continued this month, but is starting to level out and far from the 24% drop in sales that online retailers witnessed a year ago in January.

“As we head into a difficult time for consumers, the short-term outlook for the retail sector remains challenging. With the latest interest rate rise and utility price increases heading our way, shrinking household incomes means we will continue to see a shift in what consumers buy and where they buy from.  Retailers face a tightrope as their costs rise and margins are squeezed, whilst at the same time having  to ensure affordability and value for customers.  Although retailers have demonstrated resilience over recent years, it is likely we will continue to see casualties both online and on the high street this year.  Those retailers that have emerged from the pandemic in good shape will benefit from the current situation through market-share growth and consolidation opportunities, but all retailers are facing a tough few months of falling consumer spending in real terms.”

Food & Drink sector performance | Susan Barratt, CEO | IGD

“At first glance, food and drink sales in January look uncharacteristically strong, but in fact the typical slow start to the year has been heavily disguised by a big dose of inflation. After a slightly more buoyant December, it’s clear that volumes fell in January as shoppers put the post-festive brakes on their spending.

“However, there are glimmers of hope, with shoppers starting the year in a more upbeat mood and our Shopper Confidence Index improving to its highest level in a year. With the Prime Minister pledging to half inflation in 2023, coupled with our prediction that food inflation will slow this year, just 33% of shoppers expect food prices to get much more expensive compared to 53% last August. Furthermore, fewer food shoppers expect to increase their focus on saving money in the year ahead (35% vs 47% Oct’22). Shoppers are starting to benefit from lower petrol prices, and many are already adopting savvy shopping tactics like buying fewer products, making fewer trips, and only visiting certain supermarket aisles.”