Retailers caution against rise in rates despite 6% surge in sales

There was fresh evidence of the strength of consumer spending yesterday as the British Retail Consortium reported buoyant sales in December and individual retailers gave upbeat Christmas trading statements.

The BRC's retail sales monitor, compiled together with the accountants KPMG, showed that like-for-like sales in December were 6 per cent ahead of the same month last year. This was up from the 5.8 per cent recorded in November and represents the strongest increase since the figures started being compiled five years ago. Total sales growth was 8.1 per cent up on the same month last year.

However, the BRC cautioned against a rise in interest rates when the Bank of England's Monetary Policy Committee meets later this week. "Sales growth is not filtering through into inflation so we feel there is no need to raise rates," the BRC said.

The BRC said Christmas trading had started slowly but that there had been growth in all areas. Food and drink retailers saw particularly strong growth in the last three days before Christmas, while clothing and footwear retailers also saw a good performance, helped by the cold weather. Mobile phone sales were poor, it said, though DVDs and widescreen televisions did well.

The buoyant figures were echoed by strong trading statements from Majestic Wine and Alexon, the fashion retailer. Majestic Wine, which operates 98 wine warehouse stores, reported like-for-like sales growth of 11.3 per cent for the eight weeks to 31 December. Virtually all the growth came from consumers, with sales to businesses flat due to lower orders for office parties.

Tim How, Majestic's chief executive, pointed to a sharp increase in new customers as the main driver of growth. Majestic now has 264,000 customers on its mailing list who have made purchases in the past year, up 11 per cent on last year. Its shares rose 14p to 429p.

Meanwhile Alexon, the fashion retailer which includes Bay Trading, Envy and Dolcis shoe shops, also reported booming figures. Like-for-like sales in the six weeks to 5 January were up by 15 per cent on the same period last year. With margins also stronger, the company said it expected to report better than expected results for the year to 26 January, with profits of not less than £23m compared with £12m last year.

Dolcis is still loss-making and some stores have been converted into branches of Bay Trading or Envy.

Robin Piggott, finance director, said there was scope for the number of Bay Trading women's fashion branches to grow from 140 to 180 within two years. Envy, the menswear chain, could grow from 45 to 80 stores, he said.

Alexon shares rose 16.5p to 193.5p and have trebled in 12 months.