High street sales stall as consumers tighten belts

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The Independent Online

Retailers suffered their weakest sales growth for nearly two years in February, as hard-pressed consumers reined in their spending in the wake of soaring petrol prices, tax increases and uncertainty over jobs.

The British Retail Consortium-KPMG survey warned that most non-food retailers from clothing to footwear groups saw either weak or falling sales last month, although those selling big-ticket items, such as homewares and furniture chains, suffered the most, and purchases were often led by price promotions.

The monthly report found that total sales growth slowed to 1.1 per cent in February, despite this figure taking account of new store openings, aswell as price rises due rising commodity costs and the hike in VAT.

The February data compared to sales growth of 4.2 per cent in January, and was the weakest since a 0.8 per cent sales rise in May 2009, apart from April 2010, which was severely affected by the timing of Easter that year.

Stephen Robertson, director general of the British Retail Consortium, said: "Apart from a bit of help from half-term for some retailers, February's sales were weak."

The anaemic February performance confirms actual and anecdotal reports from the sector that sales and footfall into stores have fallen back since the first week of January, when retailers benefited from a surge in shoppers ahead of the rise in VAT and an overhang in spending after the December snow.

The BRC-KPMG survey said that like-for-like sales – on stores open at least one year – fell by 0.4 per cent, compared to a rise of 2.3 per centin January.

Helen Dickinson, the head of retail at KPMG, said: "February was a continuation of the trend seen in the latter part of January, with struggling non-food sales highlighting consumers' caution over the outlook. Food performed better than the previous month, boosting the overall results slightly, but furniture, home and women's clothing all had a poor month." She added: "There is inflation in these numbers, so [sales] volumes are lower, and with people making less shopping trips, fewer retailers are benefiting from the limited spending capacity available."

In a separate survey of mid-market, non-food retailers yesterday, the accountancy firm BDO said thatlike-for-like sales rose by only 0.3per cent in what it described as an "ugly" February on the high street.

According to the BRC-KPMG report, however, the grocers enjoyed an improvement in sales last month, boosted by "buoyant spending" for Valentine's Day. The robust performance by the supermarkets also suggests that consumers are limiting their shopping to non-discretionary spending on food.

Steve Barnes, the business director at IGD, the food industry's trade body, said the big grocers and their suppliers were already competing "intensely" to win over consumers for Easter, when they hope to get a boost from shoppers using the extra bank holiday, due to the royal wedding, to celebrate by eating and drinking at home.

Howard Archer, the chief European economist at IHS Global Insight, said the loss of momentum in consumer spending in February supports the case for the Bank of England to "hold fire" on raising interest rates at this Thursday's meeting.

He said: "The suspicion is that consumers will be very cautious in their spending over the coming months in the face of serious headwinds. Given that consumer spending accounts for some 65 per cent of GDP, this is a serious concern for growth prospects."