Retail sales volumes are estimated to have increased by 1.2% in February 2023, following a rise of 0.9% in January 2023 (revised from a rise of 0.5%), the latest figures from the Office for National Statistics show. However, when compared with the same month a year earlier sales volumes fell by 3.5%.
Looking at the broader picture, sales volumes fell by 0.3% in the three months to February 2023 when compared with the previous three months.
Non-food stores sales volumes rose by 2.4% over the month because of strong sales in discount department stores.
Food store sales volumes rose by 0.9% in February 2023 following a rise of 0.1% in January 2023, with some anecdotal evidence of reduced spending in restaurants and on takeaways because of cost-of-living pressures.
Non-store retailing (predominantly online retailers) sales volumes rose by 0.2% in February 2023, following a rise of 2.9% in January 2023.
Automotive fuel sales volumes fell by 1.1% in February 2023 following a rise of 1.1% in January 2023 when rail strikes may have increased car travel.
Kelly Miely, retail partner at Deloitte, said: “February saw a second consecutive month of higher-than-expected retail sales volume growth, in a sign that the industry may be turning a corner.
“However, the unexpected increase in inflation, with food prices at a 45-year high, still points to a strain on both consumers and retailers remaining.
“Businesses have been putting a greater focus on cost and efficiency. Overall, retailers are going for more tactical opportunities, whether it is making strategic investments or difficult decisions on reducing costs, trying to unlock value for the longer term and ensure the recovery and growth of their businesses.”
Silvia Rindone, EY UK&I retail lead, comments: “Retail sales improved for the second consecutive month in February, with volumes estimated to have increased by 1.2%.
“This is a welcome positive improvement, that shows some cautionary confidence from consumers. However, the 1.6% month-on-month increase in value terms is largely due to inflation. Looking ahead, growth within the retail sector is likely to be minimal.
“Rising prices continue to cause challenges for non-discretionary items as purse strings tighten. However, food store sales volumes rose by 0.9% in February 2023, improving on January’s rise of 0.1%.
“Despite confidence within the sector growing marginally, there remains a question mark over any continued growth.
“The Spring Budget saw no direct support for the retail sector, but the labour market reforms, including the provision of additional early years childcare support, will be welcome news to retailers who have been facing staff shortages.
“Retailers will also be contending with rising energy costs from the 1 April as the current Energy Bill Relief Scheme (EBRS) comes to an end. The scheme is being replaced by the Energy Bill Discount Scheme (EBDS) which is less generous than its predecessor, adding to the cost pressures the sector faces. Retailers will be inn a tough position as they decide on how much of the rising costs to pass onto the consumer.
“While the retail sector continues to face a number of challenges, brands and retailers which are managing to adapt may see opportunities to acquire both customers and market share.
“Delivering an attractive value position at an effective price point will be critical to improving business resilience and growth.”
Gizem Günday, partner at McKinsey & Company, comments: “Food store sales volumes rose by 0.9% in February 2023, likely impacted by consumers worrying about their finances and reducing spending in restaurants and takeaways.”
“The rise in retail sales will be a relief, given the impact of fruit and vegetable shortages throughout the month. However, the overall sales growth is still driven by high prices. As this growth is predominantly inflation-driven, it will be likely eroding retailers’ profit margins.
“Prolonged high inflation has meant we haven’t seen an uptick in spending volumes around special events, such as Christmas. So, with Easter and Ramadan ahead, retailers will be looking to their price and promotional strategies to help drive volume without significantly impacting their margins. Consumer spending on food will likely form a more significant part of this ‘occasion spend’ than other categories such as clothing, as people seek to celebrate with their families.”
