Retail sales get November bounce but fears remain due to Omicron surge
The UK’s November retail sales proved strong as Britons spent in the hopes of a happy Christmas ahead of the discovery of the Omicron variant. Data from the Office for National Statistics (ONS) on Friday showed sales volumes up 1.4% month-on-month and a 7.2% rise compared to their pre-coronavirus February 2020 levels.
And sales values rose 10.8% compared to October and 11.6% against the pre-Covid period, although some of that would have been accounted for by rapidly rising inflation, especially for essentials such as petrol where prices raced ahead.
The best news for the fashion sector, of course, was that clothing stores sales volumes in November 2021 were above pre-coronavirus levels for the first time, at 3.2% above their level in February 2020.
In fact, clothing was a key driver for non-food sales generally. Non-food stores sales volumes rose by 2% month-on-month because of growth in clothing stores (+2.9% compared to October) and ‘other’ locations (+2.8%) such as computer, toy and jewellery stores, with retailers noting strong trading related to Black Friday and in the lead up to Christmas.
That was entirely understandable in a fairly optimistic month before the new variant hit. Yet it’s important not to get carried away as the clouds on the horizon mean some November data already feels well out of date.
Commenting on the figures, Karen Johnson, Head of Retail & Wholesale at Barclays Corporate Banking, said that the figures were disappointing in some ways and that even though inflation was high, the presence of Black Friday meant consumers were still being driven by discounts.
“Prices down. Sales up. Black Friday was exactly the success that the UK retail industry had been hoping for, and was a major factor in last month’s retail spending increasing versus 2020”, she explained. “Yet it’s never that simple. Whilst clothing and ‘hair & beauty’ spend performed well in November (as people prepared for Christmas parties and other celebrations), early festive spend was nowhere near as strong as retailers expected.”
And that’s the point — even before new-variant fears surfaced, the rise didn’t quite meet what stores had both expected and hoped for. And now that Christmas parties are being cancelled across the UK, there’s a chance that much of the partywear retailers sold last month may be returned in December. Already on Thursday Boohoo had said it was seeing a much higher level of returns.
Karen Johnson added: “Moving forward, retailers will be concerned about the impact of the new Omicron variant on consumer confidence.”
Ans she’s not sure how that will play out. “Whilst concerns around Covid would normally drive consumers online, issues with delivery and product availability mean many could turn to the high street for their final items of Christmas shopping”, she added. “Increasing costs are also on the mind of UK retailers, with each of them having to decide how much they will be able to absorb and how much will need to be passed on to the consumer”.
Looking back at the ONS release again, the UK stats agency reported that department stores continued to struggle. Their sales volumes fell 0.2% on the month and were 3.4% below their levels of February 2020.
And the proportion of retail sales happening online fell to 26.9% in November 2021, its lowest proportion since March 2020 (22.6%) and a continuation of a falling trend since its peak in February 2021 (36.8%).
It’s unclear how much the new variant might alter this situation for certain fashion-relevant groups but those groups continue to win a large share of online spending. In November, online sales made up 27.5% of department store total sales but were down 26.9% year-on-year, although they were up 1.4% on the month.
E-sales at textile, clothing and footwear retailers made up 25.9% of the total last month and fell only 5.9% year-on-year, while they were up 0.6% compared to October.
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