Consumers splash out as sales figures rise

Jan 12 2010 by Iain Laing, The Journal

CHRISTMAS sales were better than retailers had "dared to hope for" as they enjoyed their best December growth for eight years, according to the British Retail Consortium (BRC).

Like-for-like sales rose 4.2% by value last month due to a last minute rush and thanks to a return of confidence among recession-weary consumers.

Last month’s snow and freezing cold weather also helped, with demand for winter warmers sending clothing sales growth to its highest for more than five-and-a-half years.

Internet sales were likewise given a boost as snowed-in shoppers bought online, with non-food, non-store sales growth surging to 26.5% from 16.9% in November.

The sector’s performance represents a turnaround on the 3.3% plunge in comparable sales seen last December and is the biggest December growth since 2001.

A slew of recent robust festive trading updates from the sector have already set the scene for a bumper Christmas season on the high street.

Department store chain House of Fraser reported a 7.1% hike in like-for-like Christmas sales, following equally positive figures in the past week from Next, Sainsbury’s and John Lewis.

But the weak comparisons helped flatter December’s result and it was the first and only month to see the temporary VAT reduction drop out of the equation.

The rush to snap up goods ahead of the New Year’s Day reversion to 17.5% VAT acted as a further fillip, experts have said.

The BRC warned that high street celebrations may be cut short given the prospect of a painful year ahead.

Stephen Robertson, director general of the BRC, said: “These are stronger figures than we dared hope for.

“After a surprisingly muted November, this is the best total sales growth for a December since 2005 and goes well beyond just making up for the sales fall the sector suffered a year ago.”

“But, with customers now reacquainting themselves with concerns about jobs and tax rises there is a risk that a healthy December may be only a temporary respite on the painful road to recovery,” he cautioned.

The figures from the BRC showed that food retailers benefited as shoppers decided to treat themselves by splashing out on premium lines and luxuries.

Food sales growth was the best since June thanks to indulgent purchases – a trend that has helped the big supermarket players to combat falling food price inflation.

Clothing sales showed their best growth since May 2004 against a decline last December as consumers bought coats, jumpers and scarves to fend off the adverse weather.

Trading in the electricals sector was mixed, however, with sales of goods such as TVs and laptops largely deal-driven in a highly competitive market.

Howard Archer, economist at IHS Global Insight, said strong retail spend in December would “reinforce belief that the economy exited recession with significant expansion in the fourth quarter of 2009“.