Food sales rose last month despite indies feeling the ‘January blues’

According to a new report from the British Retail Consortium and KPMG, UK total retail sales increased by 4.2% in January, against an increase of 11.9% in January 2022. This is below the three-month average growth of 5.2% and above the 12-month average growth of 2.5%. 

In short, retailers across the board experienced the ‘January blues’ last month. However, food sales showed recovery, giving hope to fine food retailers.

Post-Christmas tightening
After a jubilant return to the high street over Christmas, retailers were disappointed with a slower January. 

According to Helen Dickinson, CEO at the British Retail Consortium (BRC), “As Christmas cheer subsided, retailers felt the ‘January blues’ as sales growth slowed. 

“The coming months will continue to be challenging for retailers and their customers. Consumer confidence remains stubbornly low and looming rises in household bills and mortgages mean discretionary spending will remain weak. 

“With ongoing cost pressures and labour shortages increases in sales don’t convert into increases in profits or cash. Given that backdrop, retailers can ill-afford the millions lost to the inflexibilities of the Apprenticeship Levy, so Government must urgently look to change the system so retailers can use the funds to train their workforce to better meet the needs of their businesses and the people who work in them.”

Paul Martin, UK head of retail at KPMG, added, “With inflation running at around 10%, sales growth for January nearly halved in comparison to December to just over 4% – sending a clear signal that consumers have started the year with a tight rein on spending as they face another period of rising costs.

“As we head into a difficult time for consumers, the short-term outlook for the retail sector remains challenging. With the latest interest rate rise and utility price increases heading our way, shrinking household incomes means we will continue to see a shift in what consumers buy and where they buy from. 

“Retailers face a tightrope as their costs rise and margins are squeezed, whilst at the same time having to ensure affordability and value for customers. Although retailers have demonstrated resilience over recent years, it is likely we will continue to see casualties both online and on the high street this year. 

“Those retailers that have emerged from the pandemic in good shape will benefit from the current situation through market-share growth and consolidation opportunities, but all retailers are facing a tough few months of falling consumer spending in real terms.” 

Hope for the high street?
Although the cost-of-living crisis has continued into 2023, experts are hoping that prices will start coming down this year, alleviating stress for both retailers and consumers.

However, it is hard to predict when food prices might fall, as one of the main reasons they have risen is Russia’s invasion of Ukraine, and both countries are significant exporters of agricultural commodities. 

An end to the Russia-Ukraine conflict could relieve pressure on prices but even then, the upward price pressure on food could still continue.

However, food sales increased 8% on a total basis and 7.9% on a like-for-like basis over the three months to January. This is above the 12-month total average growth of 3.5% meaning that for the month of January, food was in growth year-on-year.

As Susan Barratt, CEO of IGD, explained, “At first glance, food and drink sales in January look uncharacteristically strong, but in fact, the typical slow start to the year has been heavily disguised by a big dose of inflation. After a slightly more buoyant December, it’s clear that volumes fell in January as shoppers put the post-festive brakes on their spending.

“However, there are glimmers of hope, with shoppers starting the year in a more upbeat mood and our Shopper Confidence Index improving to its highest level in a year. With the prime minister pledging to half inflation in 2023, coupled with our prediction that food inflation will slow this year, just 33% of shoppers expect food prices to get much more expensive compared to 53% last August. 

“Furthermore, fewer food shoppers expect to increase their focus on saving money in the year ahead (35% vs 47% in October 2022). Shoppers are starting to benefit from lower petrol prices, and many are already adopting savvy shopping tactics like buying fewer products and making fewer trips.”

Independent food retailers won’t have an easy ride ahead in 2023, but focusing on ways to provide value and quality will help to maintain sales as the cost-of-living crisis continues.