Paul Martin, UK Head of Retail at KPMG, said:
“With overall inflation running at around 10%, and food inflation sitting nearer 20%, total sales growth for February of just 5% will be eating hard into retail margins and masking the true state of the sector’s health.
Consumers are continuing to hold back on non-essential spending with sales of clothing, footwear and accessories, which have been very influential in spending for many months, continuing to decline in February. Furniture and homeware have been driving sales growth on the high street and online but we are starting to see more categories record negative sales year on year, as household budgets remain squeezed.
With increases in energy, broadband, mobile phone and council tax bills on the horizon, consumers will continue to take steps to reduce spend where they can - switching where they shop, what they buy, whilst also cutting back on activities, such as eating out and takeaways. As much of the growth in retail is being driven by inflation, price and promotional strategies have become increasingly important growth engines for retailers. Online retailers will also have to review their business models, and there are likely to be some failures in this space, particularly among the businesses that are currently over-valued following the surge in demand during the pandemic which has now decelerated.
The outlook will continue to be challenging with falling consumer spending in real terms and as more people choose to shop by ‘occasion’, retailers will be pulling out the stops for a buoyant Easter and Mother's Day.”
