The Retailer Winter Edition 2023

THE RE TA I L ER

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NEWS FROM THE BRC

HIGH INFLATION AND DISCOUNTING DRIVES CHRISTMAS SALES

Insights Insights Team British Retail Consortium

C OP26 is behind us. It was exhilarating to see so many countries come together in Glasgow late last year to deliver tangi ble progress and momentum towards tackling climate change. The attention will now rightly turn from the lofty rhetoric and fresh commit ments made in Scotland’s largest city to what each of us must do going forward. December saw the strongest retail sales growth since January, with 6.9% on a Total basis year-on-year. This was a reassuring result for many retailers, as they were coming into the festive season with significant pessimism, given the economic conditions experienced in the country. However, as inflation remains at near record levels, this still reflects a decline in volumes sold in the industry. The Christmas festivities are the highlight of the retail calendar, especially for Food sales, which increase significantly in the run-up to the day itself, with the week immediately prior to Christmas day the biggest of the year. Growth in the Food category continued to accelerate in December, resulting in average growth of 7.9% in the previous three months. This is the strongest 3-month average performance recorded since the first quarter of 2021 when grocery sales were boosted during the Covid lockdown. Sales surged in the week leading up to Christmas, resulting in a record week for the food sector. However, with Food price inflation accelerating to a record rate of 13.3% in December, according to the BRC NielsenIQ Shop Price Index, it is evident that inflation continues to fuel growth in the Food sector.

For many Non-Food categories the festive season is also the strongest month of the year for sales, with home-related products and gifting options selling particularly well in December. Home Accessories and Furniture were driven by the shift to home entertaining, as many people needed larger tables, more chairs, and the accompanying table-ware to host the whole family or larger groups of friends. However, as with the previous months, energy-saving items were the most popular in December, meaning that once again, Household Appliances performed well in December, with its strongest growth of the year. This resulted in the category at the top of the growth rankings table for the month, as not only were people buying energy saving products, but these items also became favourites for gifting options for Christmas. The earlier roll out of discounts in the week before Christmas also drove a significant amount of demand for appliances both large and small. House Textiles also soldwell, with heavier duvets and blankets proving popular, together with knitwear on the clothing side of things. Looking back at the year overall, 2022 was a tumultuous time for retail, which was certainly not needed following the losses experienced by the industry over the depths of the pandemic in the previous two years. While the monetary stimulus provided by the Bank of England during the pandemic was likely to have an inflationary impact, importers were blindsided by Russia’s invasion of Ukraine in the first quarter of the year. This not only caused energy prices to skyrocket, but also hampered the availability of key food products, which sent inflation into overdrive from that point onwards. Rising energy prices also severely constricted household spending power as autumn approached, with temperatures falling as the domestic energy price cap rose. While inflation is predicted to subside after the first half of 2023, it remains to be seen whether household spending power will recover and aid the ongoing recovery of the retail industry.

% CHANGE year-on-year

TOTAL LIKE-FOR-LIKE

Total sales rolling average growth: Food

UK Retail Sales

+6.9% +6.5%

Food (3-mth)

+7.9% +7.7%

Non-Food (3-mth)

+1.5% +1.1%

Non-Food – Store (3-mth)

+5.3% +4.5%

Non-Food – Online

-3.0%

n/a