Festive sales 'stronger than retailers dared hope for'

Best Christmas for the high street since 2001, says British Retail Consortium

Retailers HAVE shrugged off the downturn to record their best Christmas trading figures since December 2001, but store owners are warning that the buoyant sales may offer only temporary relief on the "painful road to recovery".

Following a series of upbeat sales updates from shops this month, the British Retail Consortium will today confirm that total underlying sales rose by 4.2 per cent in December – the sector's best festive performance since 2001. But the results are flattered by comparisons with the dire trading recorded in December 2008, and the cutting of VAT to 15 per cent that month.

Stephen Robertson, the director general of the BRC, said: "These are stronger figures than we dared hope for. They were certainly helped by the comparison with last December's terrible results but customers clearly felt more confident about spending than they have for some time."

Total retail sales jumped 6 per cent last month – the strongest performance since December 2005 – a BRC-KPMG survey found. Clothing sales "picked up markedly" and saw their best growth since May 2004. The harsh winter boosted sales of clothing including coats, knitwear, gloves, tights and leggings, the BRC reported.

All sectors apart from furniture and flooring, where recent upward sales momentum appears to have slowed, performed very strongly.

In the three months to 31 December, underlying food sales increased by 2.6 per cent and non-food sales were 3.8 per cent higher. Last month, grocers returned to form by delivering their strongest growth since June. The BRC said this partly reflected higher food price inflation and intense promotional activity, but also that shoppers were treating themselves to supermarkets' premium ranges. According to separate data from the retail analyst TNS, Waitrose was the top dog over Christmas, with sales for the 12 weeks to 27 December rising by 16.5 per cent. But sales at Morrisons and Sainsbury's also grew – by 10.3 per cent and 6.9 per cent, respectively. Asda was up 5.8 per cent and Tesco's by 5.5 per cent.

Yesterday, Britain's fifth-biggest grocer the Co-operative Group joined the outdoor specialist Blacks Leisure and womenswear chain Jacques Vert in adding their names to the list of retailers who achieved strong sales growth over Christmas.

The Co-operative Group, which acquired Somerfield last year, said its underlying sales, excluding fuel and including VAT, rose by 4.8 per cent in the 12 weeks to 2 January. Tim Hurrell, the company's managing director of food retail, cited an 80 per cent increase in sales of its value lines, which were relaunched last spring, but also said that sales of its premium products had grown strongly. But he warned: "I think 2010 will be a tough year for the sector. I cannot see the current economic climate improving over the course of this year and not until 2011."

Many retailers fear that consumer spending will fall if the next Government raises taxes to slash the bulging public deficit of £178bn. Continuing fears about unemployment, rising fuel bills and a hike in interest rates further down the line may also have an adverse effect, the BRC believes. Mr Robertson said: "Snow kept people away from the shops for a time but they made up for that in the days just before Christmas and as sales events began immediately afterwards. 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."

Despite the buoyant festive sales, industry experts said the real proof of the pudding would come when store operators post their annual profits. Nick Hood, of Begbies Traynor, said: "The prospects for the sector depend on retailers concentrating on their profitability, not on their top-line sales."

Shopfitters, a key gauge of retailing expenditure, are also cautious. Ivan McKeever, of Styles & Wood, said: "It is easy to get excited after such a good Christmas but we see retailers staying cautious about investing in stores until the second half."