February retail growth 'eating hard' into retail margins

While February retail sales proved "better than expected", poor growth is still eating hard into retail margins, according to new figures from the British Retail Consortium (BRC) and KPMG.

Overall retail sales increased by just over five per cent in February compared to a 6.7 per cent rise during the same period of last year. But figures were above the 12-month average growth of 2.4 per cent.

However, Paul Martin, UK head of retail at KPMG, warned that these numbers, alongside overall inflation running at around 10 per cent and food inflation sitting nearer 20 per cent, mean total sales growth for the month "will be eating hard into retail margins and masking the true state of the sector’s health".

He warned that consumers are continuing to hold back on non-essential spending with spending on clothing, footwear, and accessories on the decline last month.

“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 - switching where they shop, what they buy, whilst also cutting back on activities, such as eating out and takeaways," said Martin.

Like-for-like UK retail sales increased by almost five per cent last month, compared to 2.7 per cent in the same period of 2022.

Food sales were up 8.3 per cent over the three months to February, while non-food sales increased by 3.2 per cent during the same period.

“Retail sales held up better than expected this February, though volumes remained down on last year,” said Helen Dickinson, chief executive of the BRC.

She added that while the cost-of-living crisis has made customers increasingly price sensitive, they are still ready to celebrate special occasions like Valentine's Day, which saw strong sales of fragrance and jewellery.

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