UK retailers see weak sales growth in November despite Black Friday deals (updated)

Quiz

05/12/2023 09:20

* 
      Retail sales up 2.7% year-on-year -BRC
    

        * 
      Pressure on discretionary spending
    

        * 
      Food sales more robust
    

  
 (Adds detail, Quiz warning paragraph 2, analyst comment
paragraph 3, Kantar data paragraph 8)
    By Suban Abdulla
       LONDON, Dec 5 (Reuters) - British retail sales growth
remained sluggish in November despite Black Friday deals, as the
ongoing cost-of-living squeeze prompted shoppers to rein in
spending on non-essential items, the British Retail Consortium
said on Tuesday.
    The subdued data and a warning on the outlook from small
fashion retailer Quiz  QUIZ.L  added to concerns over
discretionary spending in the key trading weeks to Christmas.
        "We continue to believe that food, beverages and
affordable treats will attract shoppers over bigger ticket
discretionary in the 2023 festive period," Clive Black, head of
consumer research at Shore Capital, said.
  
    The BRC said spending increased 2.7% in annual terms last
month, well below the 4.2% rise a year ago, and similar to the
2.5% increase in October.
    The BRC data is not adjusted for inflation, so November's
sales growth represents a fall in the volume of goods purchased.
   
    "The cost-of-living crisis has taken its toll on Christmas
spending for many households, and the continued economic
conditions are testing consumer resilience," said Paul Martin,
UK head of retail at accountants KPMG, who sponsor the data.
    Tuesday's figures suggested consumers were opting for
budget-friendly items. The food and drink and personal care
categories drove sales growth as spending on expensive items
such as jewellery fell.
    Separate data from market researcher Kantar on Tuesday also
showed more robust sales growth from supermarkets.
    Britain's economy is still suffering from weak growth, but
official data showed consumer price inflation slowed sharply in
October to 4.6%, after hitting a 41-year high of over 11% one
year earlier.
    The Bank of England has held interest rates at 5.25% at its
last two meetings following 14 back-to-back increases since
December 2021. While financial markets are almost certain rates
have peaked, BoE officials, who are closely monitoring upside
risks to inflation, have stressed it is too early to cut rates.
    Martin said weak sales could lead to some retailers
collapsing in early 2024, especially in the case of purely
online retailers who had seen the most prolonged fall in sales.
    Online spending data from Adobe Analytics last week showed a
5.6% year-on-year increase during Black Friday and the immediate
days after. 
    In the U.S., retailers such as Amazon.com and Foot Locker
are signaling optimism for holiday season sales after
stronger-than-expected figures during Black Friday and Cyber
Monday.
    Separate figures from Barclays on Tuesday showed consumer
spending on payment cards rose by 2.9% year-on-year in November,
compared to 2.6% in October, helped by extended Black Friday
sales.
    Despite a raft of recent downbeat surveys, major retailers,
including Tesco  TSCO.L , Sainsbury's  SBRY.L , Next  NXT.L ,
Primark  ABF.L  and Marks &Spencer  MKS.L , have made confident
comments about prospects in the Christmas trading period.
    Barclays said consumers turned more optimistic about
economic pressures, with concerns about inflation and the cost
of food prices reaching the lowest level since December 2021.
    However, Jack Meaning, chief UK economist at Barclays, said
it was unclear if this would boost sales volumes next year.  
    "The key question for the UK is what happens after the
holiday period. It will take more than a festive bounce to keep
consumers spending in 2024," he said.

 (Reporting by Suban Abdulla; additional reporting by James
Davey; editing by David Milliken and Sharon Singleton)
 ((Suban.Abdulla@thomsonreuters.com))