Is strongest January in six years the start of a retail recovery?

National | Retail

British high streets enjoyed their best month for in-store sales in six years during January, according to a new study – with an end to Brexit deadlock and stock discounts to thank.

Accountancy and business advisory firm BDO LLP’s High Street Sales Tracker revealed like-for-like sales increased by 5.7% in January, from a marginally negative base of -0.2% in the corresponding month a year earlier.

The firm believes the upsurge is the result of an end to Brexit uncertainty and continued discounting to attract buyers, with its experts saying the data shows the 2020s have ‘roared into life’ following a challenging year.

Sales were positive in every week of the month, and all three categories – lifestyle, fashion and homeware – reported positive results in the same month for the first time in two years.

These encouraging figures to however come with the caveat that any retail recovery is still at an early an unpredictable stage, and it remains to be seen if the pickup in confidence will translate into a meaningful long-term boost for struggling high streets.

Sophie Michael, National Head of Retail and Wholesale at BDO LLP, said: “Despite January being the best month in six years, this may be a false dawn in terms of a high street recovery.

“Whilst like-for-like sales may be positive, other reports show that stock levels of retailers are high and buying orders have again fallen, which suggests that discounting once again is driving sales. Delaying a return to full pricing will ultimately impact on already paper-thin margins. With returns also unaccounted for, the true picture of January has yet to emerge.

“Bargain-hungry shoppers are continuing to acclimatise to increasingly lengthy sales periods, which stores are responding to with discounting still visible on the high street.

“February will show whether consumer confidence has got a toehold in some kind of recovery for retail.”

January’s success was led by in-store homeware sales, up +8.9% from last year, and the best January result for the segment since 2011.

The beleaguered fashion sector also made an impressive recovery, recording its best in-store January result since 2014 with +5.8% like-for-like growth ending a two-month slide of negative results.

The lifestyle sector performed well too, up +5.1% year-on-year – the best January in-store result for the segment since 2014.

Despite the impressive results, BDO warns this rebound is measured against one of the worst years on record. 2019 was the fifth consecutive year of falling sales for the high street, which resulted in the closure of more than 2,000 stores and the loss of 46,000 jobs.

Away from the high street, non-store sales continued to go from strength to strength, recording a +18.8% bounce on top of last year’s already healthy base of +19.1%.

However, not everyone is convinced that January’s results are indicative of a retail sector revival.

George Charles, of online shopping discount aggregator MoneySavingHeroes, said: “Is this good news for the high-street? Are we finally starting to see a resurging market? I highly doubt it, despite this apparent good news; sales have been at rock bottom for a while now and there is only one way you can go when at rock bottom and that is up, creating a false sense of security.

“High street sales are still not worth celebrating when you look at the big picture.

“A huge factor in this minor resurgence is big discounts and an easing political landscape. It’s the calm before the storm as people aren’t yet seeing the effects Brexit may cause and this positive month could increase expectation before destroying them a few months down the line.

“My advice for the retail sector would be to remain grounded and wait until we have a run of good results. As for now, it is business as usual.”

 

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