Retailers suffer lacklustre festive sales growth

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British retailers were left wanting over the festive season after rising food costs squeezed consumers and left less money for Christmas spending.

Figures from the British Retail Consortium (BRC) and KPMG showed like-for-like retail sales rose by a paltry 0.6% in December, compared to 1% growth for the same month in 2016.

Total sales also eased back to a 1.4% rise last month, following an expansion of 1.7% a year ago.

While retailers enjoyed a brighter performance online, non-food sales still came in shy of the 8% average at 7.6%.

Helen Dickinson, BRC chief executive, said “there was both light and dark in this year’s Christmas trading period”, but the difference between the growth in food and non-food sales had “never been so stark”.

In-store like-for-like sales of non-food items recorded the largest fall since records began at 4.4% for the three months ending in December, while food sales lifted by 2.6% over the period.

Inflation unexpectedly jumped to a near six-year high in November at 3.1%, with sluggish wage growth also ramping up the pressure on consumers.

Ms Dickinson added: “With inflation outpacing income growth, shoppers continued to see more of their spending power absorbed by essential items, including food, leaving less left over for buying Christmas gifts.

“That made this year’s festive period all the more nail-biting for non-food retailers, many of whom offered deep discounts in the last weeks before Christmas in the hope of something to celebrate at the end of a year, which has seen, on average, zero growth in non-food sales.

“These promotions came as a welcome relief for stretched households, although the late lift in sales came at the expense of margins for many retailers.”

The latest slew of data comes as the UK’s retail heavyweights reveal their Christmas trading figures this week.

Tesco and Marks & Spencer are among a bevy of retailers to report to the market following a strong showing from Next and a profit warning from struggling Debenhams.

Paul Martin, KPMG’s head of retail, said: “2017 presented retailers with a cocktail of geopolitical and economic uncertainty, on-going margin pressures and the structural changes driven by technology and changing consumer behaviour.

“In a market that will at best see stagnant growth in 2018, gaining market share will be a primary focus.”

Separate figures from Barclaycard showed consumer spending grew by 4% last month, with the money spent on clothing and air travel rising by 4.1% and 6.1% respectively.

Online spending was up 14.1%, according to the research, with essential spending pushing 3.7% higher and discretionary spending up by 4.2%.

Paul Lockstone, managing director at Barclaycard, said: “Following months of consumers ‘feeling the squeeze’ of inflation, spending in December was comparatively robust, boosting an otherwise muted quarter.

“It’s reassuring to see that we continue to prioritise the festive period as a time to spend on celebrations with friends and family, although many of us took advantage of the sales to do this, indicating we are now a nation of value seekers.”

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