Retail sales slip as inflation firms its grip
By Josh White
Date: Tuesday 07 Jun 2022
(Sharecast News) - Retail sales fell in May, according to fresh data released on Tuesday morning, as the cost-of-living crisis and soaring inflation squeezed consumers further.
On a total basis, the BRC-KPMG retail sales monitor showed sales decreasing 1.1% in May, against an increase of 28.4% at the same time last year.
That was below the three-month average growth of 0.7% and the 12-month average growth of 4.1%.
Sales figures are not, however, adjusted for inflation, so given that both the shop price index for May and the consumer price index for April showed inflation running at historically high levels, the small drop in sales masked a "much larger" drop in volumes, the British Retail Consortium noted.
On a three-year basis, total retail sales grew 6.2% during May, compared with the same month in 2019.
"Sales continued to see declines as the cost-of-living crunch squeezed consumer demand," said BRC chief executive Helen Dickinson.
"Higher value items, such as furniture and electronics, took the biggest hit as shoppers reconsidered major purchases during this difficult time.
"Nonetheless, fashion and beauty did well as people prepared for holidays abroad and the summer's social calendar; with red, white and blue outfits adorning shopping carts ahead of the jubilee weekend."
Online sales, meanwhile, appeared to have stabilised at a 'new normal', Dickinson said, with the share of total non-food retail sales coming through digital channels settling at around 39%, compared with 30% pre-pandemic, though that was "well down" on lockdown peaks.
"It is clear the post-pandemic spending bubble has burst, with retailers facing tougher trading conditions, falling consumer confidence, and soaring inflation impacting consumers' spending power.
"Supply chain issues including rising commodity and transport costs, a tight labour market and higher energy bills are forcing retailers to increase their prices, contributing to wider inflation.
"Profits may be squeezed further, as retailers continue to find efficiencies in their own operations and supply chains to reduce the impact of future price rises for consumers."
On a like-for-like basis, UK retail sales decreased 1.5% from May 2021, when they had increased 18.5%.
That was below the three-month average decline of 1.1%, and the 12-month average growth of 1.8%.
Over the three months to May, food sales were down 1.3% on a like-for-like basis and 0.7% on a total basis, which was below the 12-month total average growth of 0.6%.
Non-food sales over the three months, meanwhile, decreased 1.0% on a like-for-like basis and increased 2.0% on a total basis.
That was below the 12-month total average growth of 7.0%.
"For the second month in a row UK retail sales declined, highlighting that consumers are becoming more sensitive to the cost of living," said Paul Martin, head of UK retail at KPMG.
"Non-food purchases related to the home, such as furniture, home appliances and computing, suffered the biggest falls in spending in May.
"Online, although still significantly higher than before the pandemic, has now experienced a double-digit decline over the last three months."
Martin said there was better news, however, for clothing, footwear and accessories sales, with both in-store and online purchasing driven up by the approach of the summer season and the promise of outdoor events and travel firmly on the minds of many consumers.
"The rising cost of living is going to remain the main story for retailers for the immediate future, with consumer confidence a key factor to watch out for.
"Retailers will be hoping that a post-jubilee and summer feel-good factor begins to improve confidence amongst some shoppers - as presently overall confidence levels are lower than sales may suggest.
"Cost and efficiency will firmly be top of agenda for most operators, and understanding how they can protect their margins whilst remaining price competitive for consumers."
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