January retail sales like-for-like drop 'sobering'

Total sales rose 2.1%. It was the second worst January sales performance since 1995, when the survey began. Sales in January 2010 were the worst ever.

Food sales, which had done well over the Christmas period, slowed sharply in January, returning back to pre-Christmas levels as shoppers bought cautiously once again. New year resolutions and warmer weather helped the sale of fresh fruit and poultry.

Non-food sales also weakened with clothing sales growth slowing to near zero. The worst performing category was womenswear but men’s and children’s clothing continued to grow year-on-year. Discount driven sales drove any growth but hit retailers’ margins.

Non-food online sales also slowed to 11.3% after sharp growth in December of 18.5%.

BRC director general Stephen Robertson said despite an improvement in consumer confidence, households are concentrating on using money to pay off debt.

“Big-ticket goods are still the weakest part of retailing, undermined further by the comparison with last year when beating the VAT rise and promotions linked to it helped sales,” he said.

Sales in electricals were broadly flat, compared to last January’s rush to buy before the VAT rise.

But the post-Christmas Sales led to the first year-on-year growth in furniture and floorcovering sales since July, although the gain was small and underlying trade remained weak.

Robertson added: “In 2011 overall like-for-like growth averaged virtually zero and that was with a boost to top line figures from inflation, including the higher VAT rate, which won’t continue in 2012. Against that background, Government must hold down the costs it’s responsible for.”  

KPMG head of retail Helen Diskinson said: “After a stronger than expected December, these 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.

“But the underlying health of the sector remains a key concern, with margins and profits squeezed by the relentless need to discount to generate demand.  Many retailers are rethinking their entire business models in a desperate attempt to adapt to this low growth environment and pricing remains more strategic than ever before.”