Retail sales boost should be ‘accepted cautiously’

UK retail sales rebounded by 3.4 per cent in January following a record decline of 3.3 per cent in the previous month, according to the latest ONS data.

The organisation said that the January figures represent the biggest monthly rise since April 2021, returning volumes to November 2023 levels.

But Samantha Philips, partner at McKinsey & Company said that the uptick should be “accepted cautiously”, as the UK is expected to experience a year of further ups and downs.

The British Retail Consortium (BRC) welcomed the results but also highlighted that challenges such as new border control costs and business rate hikes remain for retailers.

The ONS data showed that sales volumes across all categories, except clothing, increase during the four-week period, with food stores including supermarkets contributing most to the increase.

More broadly, sales volumes fell by 0.2 per cent in the three months to January when compared with the previous three months, however this was the smallest fall since August 2023.

“There was promising news as sales volumes rose for the second time in three months, following 19 prior months of decline,” said Kris Hamer, director of insight, BRC. “This reflected rising levels of consumer confidence, as well as a boost from the January sales.

“Categories, such as computing, and cosmetic & toiletries performed well. Food sales continued to outstrip non-food sales – mainly due to higher levels of inflation on these products. Nonetheless, shoppers remained cautious as they entered the third year of the high cost of living.”

McKinsey & Company's Samantha Philips said that household budgets will remain under pressure, with consumers mindful about where they hold back spending.

"Retailers may have to find new ways to appeal to consumers in a recessionary environment," she continued. "With tactical cost-savings mostly exhausted, they will likely focus on share growth, whilst looking at fundamental business model shifts such as GenAI opportunities and data and loyalty programmes."

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