Valentine’s Day spenders helped to boost UK retail sales in February even though sky-high inflation meant shops were still suffering a squeeze on their margins.
(Bloomberg) — Valentine’s Day spenders helped to boost UK retail sales in February even though sky-high inflation meant shops were still suffering a squeeze on their margins.
Like-for-like sales climbed 4.9% from a year ago after a 2.7% increase in February 2022, according to data from the British Retail Consortium and the consultancy KPMG. It was well above the 12-month average of 1.6%.
While the figures were better than expected, helped along by sales of fragrance and jewelery around Valentine’s Day, the BRC also reported a much larger drop in the volume of goods sold as high inflation means shoppers are getting less for their money.
“With overall inflation running at around 10%, and food inflation sitting nearer 20%, total sales growth for February of just 5% will be eating hard into retail margins and masking the true state of the sector’s health,” said KPMG’s UK head of retail Paul Martin.
Retailers are struggling to determine how much of the rise in their costs they can pass on to consumers, who are increasingly frugal in their spending habits. The BRC said shops are competing with essentials in people’s budgets, which have risen sharply in the past year.
“With increases in energy, broadband, mobile phone and council tax bills on the horizon, consumers will continue to take steps to reduce spend where they can,” Martin said. He noted that people are “switching where they shop, what they buy, whilst also cutting back on activities, such as eating out and takeaways.”
Some online retailers were likely to fail unless they re-evaluated their business model, Martin added, especially those which benefited from a surge in demand during the pandemic which has since faded.
Despite the “challenging” outlook for retailers, BRC Chief Executive Officer Helen Dickinson said the figures showed shoppers were “still ready to celebrate special occasions.”
Soaring energy bills meant energy-saving appliances also continued to sell well, Dickinson added, “but the rush for warm coats and boots subsided as the January sales splurge satisfied customer appetite.”
Red-hot inflation in the food sector pushed up like-for-like sales by 8.2% in the three months to February, but the report from the BRC and KPMG pointed out that volumes were continuing to decline “and events like Valentine’s Day are failing to make a positive impact.”
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