Official: worst Christmas on the High Street for 13 years

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The Independent Online

General retailers suffered their worst Christmas in 13 years according to official figures released yesterday which confirmed the troubles facing the high street.

Retail sales fell 0.4 per cent in December, usually the key month for shopping, worse than the 0.2 per cent increase that economists had forecasted. This followed a 1 per cent increase in November.

Sales volumes for non-specialised stores, which includes department stores, dropped 4.3 per cent in December, the steepest drop for the sector since February 1994.

The figures from the Office for National Statistics will put pressure on the Bank of England to cut interest rates to 5.25 per cent next month.

Vicky Redwood, UK economist at Capital Economics, said the figures showed customers shunned the high street over Christmas. "We don't see things getting any better from here," she said. "House prices are falling, so are equity prices, utility prices are rising, confidence is at a 12-year low ... need we go on?"

The Bank reduced interest rates to 5.5 per cent in December, but voted for no change last week.

Howard Archer, economist at Global Insight, said the data significantly intensifies the pressure on the Bank. "The fall in retail sales growth in December indicates that consumer spending is now increasingly faltering in the face of mounting headwinds," he said.

Evidence that the economy is slowing down was provided by Tesco, which saw sales growth slow in the three months to Christmas. The supermarket's finance director Andrew Higginson has called for an immediate cut in interest rates. Marks & Spencer chief executive, Sir Stuart Rose, said the high street was facing its worst conditions for a decade after the retailer reported a fall in like-for-like sales of 2.2 per cent in the third quarter, its worst performance in two and a half years. A raft of retailers, including Next, DSGi and Signet have reported disappointing sales over the festive period.

Only food stores showed any improvement in December, with sales volumes up by just 0.1 per cent.

The total value of sales for the month of December was estimated at £33.9bn, 1.4 per cent higher than the same month the previous year, the lowest growth since March 2006 when it fell by 0.2 per cent.

However, internet sales performed well as evidenced in figures for non-store retailing and repair, which rose by 4.4 per cent, the largest growth for this sector since October 2006.

Paul Clarke, national director of the retail and wholesale sectors for Barclays, said retailers' margins were being hit by "rising energy bills, high commodity costs and ever more competitive pricing".

Who's up and who's down

Winners

* HMV: Reported best Christmas ever with 9.4 per cent rise in same store sales

* Boots: Like-for-like sales up 4.8 per cent

* John Lewis: Sales jumped 6 per cent

* Sainsbury: Defied gloomy expectations with 3.7 per cent rise in like-for-like sales

* Game: Underlying sales rose 32 per cent driven by demand for Nintendo Wii and DS Lite consoles

Losers

* DSGi: Issued a profits warning alongside a 1 per cent fall in same store sales

* M&S: 2.2 per cent fall in sales

* Tesco: 3.1 per cent rise in underlying sales, but still missed forecasts

* JJB: Despite 2 per cent rise in sales will miss profit targets after slashing prices

* Signet: Issued a profits warning after 7 per cent fall in sales

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