Outlook: Consumers spent more on food than gifts at Christmas

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From 12th January Intelligence Report:

Retailers have reported that food sales were good at Christmas, but non-food sales were not as hoped. The latest British Retail Consortium/ KPMG Retail Sales Monitor for December shows the continuing struggles for the non-food retailers. For the recycling sector, this suggests there will be more food packaging to be recycled than packaging around nonfood items. Overall, UK retail sales increased by 0.6% on a like-for-like basis from December 2016, when they had increased by 1.0% on the preceding year.

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On a total basis, sales rose 1.4% in December, against a growth of 1.7% in December 2016. This is consistent with the 3-month and 12-month averages of 1.1% and 1.5% respectively. Over the three months to December 2017, in-store sales of non-food items declined 3.7% on a total basis and 4.4% on a like-for-like basis, the deepest since BRC began these records in 2012. On a 12-month basis, the total decline was 2.2%. Over the three months to December, food sales increased 2.6% on a like-forlike basis and 4.2% on a total basis. This is the highest since June and remains above the 12-month average growth of 3.4%.

Over the three months to December, non-food retail sales in the UK decreased 1.9% on a like-for-like basis and 1.4% on a total basis, the lowest since March 2009. This is below the 12-month average of 0.0%. Online sales of non-food products grew 7.6% in December. This is below the 12-month average of 8.0% but above the 3-month average of 6.2%. BRC chief executive Helen Dickinson said There was both light and dark in this year’s Christmas trading period. Growth in spending was in line with the, albeit modest, average for the year. However, the divergence between growth in sales of food and non-food has never been so stark.

With inflation outpacing income growth, shoppers continued to see more of their spending power absorbed by essential items, including food, leaving less left over for buying Christmas gifts. That made this year’s festive period all the more nail-biting for non-food retailers, many of whom offered deep discounts in the last weeks before Christmas in the hope of something to celebrate at the end of the year.

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