Promotions lift retail sales to four-year high

Retailers saw the strongest sales growth in almost four years in January as promotions and discounts, as well as the recovery in the housing market, convinced shoppers to spend.

Promotions and discounts encouraged shoppers to spend in January, according to the latest figures from the British Retail Consortium.

Figures from the British Retail Consortium show that retail sales at stores open for more than a year were up 3.9 per cent compared to January 2013, boosted by furniture and home accessories. Including receipts at new stores, sales increased 5.4 per cent during the month, up from 3 per cent a year ago.

For the three months to the end of January, like-for-like sales were up 1.7 per cent, with non-food retail up 4 per cent. Online sales of non-food were up 19.2 per cent year on year in January, the strongest growth since January 2009 and meaning ecommerce now accounts for 17.4 per cent of sales.

The BRC says the figures are better than expected given the ongoing squeeze on personal finances as wage growth fails to keep up with inflation. However, it warns that comparisons are against “soft” non-food sales last year when snowy weather saw shoppers stay indoors and that this level of growth may not be maintained for the rest of the year.

It also cautions that many retailers have had to discount heavily to secure sales and this may have hit their bottom line, with some genuinely beating expectations but others now counting the cost of this strategy. John Lewis has hailed its decision to hold off on discounting until January for its out-performance of the market, while retailers such as Debenhams there were lured into discounting have issued profit warnings.

Helen Dickinson, director general at the BRC, says: “Customers responded enthusiastically to a range of sales and promotions on non-food items this January. Retailers succeeded in tempting shoppers in with promotions and they also saw strong demand across new ranges, helped by improvements in consumer conditions.

“Given the underlying conditions, it remains to be seen how the trend for the rest of the year will pan out.”

There is a “stark” contrast between food and non-food, with the former seeing value sales for the three months to the end of January fall by 1.2 per cent year on year as the grocers continue to battle for market share. The major supermarket chains are offering widespread discounts and January promotions as they fight to attract customers amid growing competition from discount and premium grocers.

David McCorquodale, head of retail at KPMG, says: “The divide between food and non-food is stark, with the battle for market share in food remaining ferocious, customer loyalty fickle and cost deflation being passed through to the consumer.”

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