The British high street endured a disappointing festive season, with overall retail sales growth slowing sharply to just 1.2% in December compared to the previous year. The data from the British Retail Consortium (BRC) paints a picture of a "drab Christmas" for many traditional retailers, falling well below the 12-month average growth rate of 2.3%.
Non-Food Sales Stumble as Food Holds Firm
While food sales proved resilient, the crucial non-food sector, encompassing items like clothing and computers, saw sales slip by 0.3%. This marked a stark reversal from the 4.4% growth witnessed in December of the previous year. Helen Dickinson, Chief Executive of the BRC, described it as a "drab Christmas," noting that sales growth had now slowed for four consecutive months.
"Non-food sales fell flat in the run-up to Christmas, with gifting items doing worse than expected," Dickinson stated. She added that many consumers delayed purchases, waiting for deeper discounts, with a significant sales spike only materialising in the week following Boxing Day as the January sales began.
Discount Supermarkets Shine Amid Gloomy Outlook
In a clear sign of shifting consumer habits driven by cost-of-living pressures, the discount supermarkets Aldi and Lidl reported bumper Christmas trading. Aldi's UK arm saw sales rise by 3% year-on-year in the four weeks to 24 December, while Lidl reported an impressive 10% sales jump in the four weeks to Christmas Eve.
This contrasted with the performance of larger rivals. Although Tesco and Sainsbury's reported sales growth, their share prices fell sharply as investor expectations were not met. The broader picture for general merchandise was weak. Argos, owned by Sainsbury's, reported a 2.2% sales decline in the six weeks to 3 January, citing "significant headwinds from online traffic trends" and weak consumer confidence.
Mounting Pressure on Traditional Retail Models
Separate data from Barclays bank showed card spending fell by 1.7% in December year-on-year, the largest drop since February 2021. The retail sector is grappling with a potent mix of challenges: persistently high costs, low consumer confidence, and fierce competition from online-only, cut-price rivals like Temu and Shein.
The strain is showing across the industry. Associated British Foods, owner of Primark, issued a profit warning after weak sales, sending its shares down around 15% this year. Furthermore, several well-known chains, including the jewellery brand Claire's and the clothing chain LK Bennett, are reportedly poised to call in administrators.
Looking ahead, the outlook remains cautious. Barclays research found that 64% of shoppers intend to cut grocery spending this year, with more than half also planning to reduce discretionary spending on items like new clothes and restaurant meals.
