Retailers are being warned to prepare for continued volatility after the latest Office for National Statistics figures showed sales volumes fell 0.4 per cent in February, with industry experts pointing to cautious consumers, wet weather and mounting cost pressures.
The decline followed a 2.0 per cent rise in January, as supermarkets and household goods stores lost momentum and non-store retailers also saw sales ease back after consumers brought forward spending to take advantage of earlier discounting.
Despite the monthly dip, sales volumes rose 0.7 per cent over the three months to February and were up 2.5 per cent year on year, suggesting demand has not disappeared but is becoming more selective.
Online remained a relative bright spot. Online sales values rose 0.6 per cent month on month and 11.4 per cent year on year, with the share of total spending made online edging up from 28.0 per cent in January to 28.2 per cent in February.
Sandra Prince, head of consumer at Lloyds, said the figures pointed to a shopper who is becoming increasingly selective.
“A softening in retail sales could point to consumers becoming more selective in their purchases, however it is worth noting that online demand remained consistent,” she said.
“Retailers are experienced at navigating challenging environments and are demonstrating resilience through diversification, cost management, and investment in digital technology.”
Others were more downbeat about the broader outlook. Phil Monkhouse, UK country manager at Ebury, described February as “a damp squib”, saying poor weather and cautious consumers had reversed much of January’s rebound.
“Retailers will now be hoping that improving spring weather and Easter holidays will provide a lift, but the global backdrop is becoming more challenging,” he said.
He warned that inflationary pressure, rising borrowing costs and renewed geopolitical tension could keep consumer confidence subdued, adding that retailers would need to maintain strong access to financing, manage currency exposure carefully and stay focused on operational efficiency.
Nicholas Found, head of commercial content at Retail Economics, said the latest figures exposed “a retail market where spending was narrow, highly selective and event-led”, with modest boosts from occasions such as Valentine’s Day failing to mask a more fragile backdrop.
“This year is shaping up as a battle for market share against lacklustre economic growth,” he said.
“Retailers are facing a tougher operating environment just as demand remains fragile, with rising labour costs, margin pressure and a growing need to invest in productivity and automation.”
He added that the winners would be those able to combine strong value perception with real differentiation and disciplined execution across channels.
Accenture’s UK and Ireland retail strategy and consulting managing director Matt Jeffers said the figures would leave many retailers approaching spring with “growing trepidation”.
“The challenge for retailers now will be protecting profitability without undermining demand,” he said.
“Many will be prioritising efficiency gains, from supply chains to store operations, while using data-led promotional strategies to offer value to customers where it matters most.”
Jeffers added that retailers would also need to be careful about how and when they pass on price rises, given how sensitive shoppers remain to any sign of everyday costs rising again.
Erin Brookes, European retail and consumer lead at Alvarez & Marsal, said February’s figures signalled a “loss of momentum”, with weaker demand in categories such as clothing and household goods underlining subdued consumer confidence.
“Retailers will now be looking to the arrival of spring and more favourable weather conditions to help stabilise trading, particularly across seasonal categories,” she said.
But she added that the longer-term picture remained uncertain, with geopolitical tension in the Middle East threatening to push up supply chain, transport and energy costs at a time when discretionary spending is already under strain.
“For retail leaders, the imperative now is control – on margins, on customer experience, and on supply chain resilience.”
Click here to sign up to Retail Gazette‘s free daily email newsletter
