Retail woes in the UK

Food and drink was the strongest performing retail sector on the UK high street last month, despite overall retail sales experiencing a record low. Retail sales were down 3.3% on the same period last year, the poorest December since the British Retail Consortium’s survey began.

Even though food and drink outperformed other categories, it also experienced a tough year, having posted its weakest growth since March.

The research reported that struggling high street sales performed slightly better in the second half of December, mainly due to heavy discounting and last minute Christmas
shopping.
 
Helen Dickinson, head of retail at KPMG, described the bind on shops at the moment as a “double whammy of falling sales and falling margins”. However, more people chose to order online this year, as non-food, non-store sales saw a 30% increase on a year ago. Tesco.com and Tesco Direct both saw an 18% sales increase on this time last year.

While the strength of the food and drink category in comparison to other retail areas has helped supermarkets’ performance, not everyone has fared well. Marks and Spencers’ like-for-like food sales were down 5.2%.

In comparison, last week Sainsbury’s announced sales figures that showed a like-for-like increase of 4.5% in the UK (for the 13 weeks to 3 January 2009, excluding petrol) with its Basic Range showing a 40% increase in sales over the year.

Asda and Waitrose also released positive Christmas figures. The two stores, despite their different customer profiles, both claimed that 23 December was their busiest day ever.

Tesco’s like-for-like sales increase was only 2.5% (for the seven weeks up to 10 January, excluding petrol). The retail giant has referred to the current trading conditions as “challenging” despite its strong online figures.

Dickinson added that December’s performance reflects “the severity of the shift in the mentality of the consumer."

Dan Macadam, 14.01.09