Soggy February weather and continued cost of living pressures put a dampener on retail sales last month, with growth slowing to just over 1% as many households saved cash by snuggling up on the sofa.
Sales of non-food items slumped by 2.5% in the three months to February – led by declining demand for footwear, household appliances, furniture and clothing – amid weak consumer confidence, according to the latest retail sales monitor from the British Retail Consortium (BRC) and the advisory firm KPMG.
Food sales increased 6% but that was slower than the 6.3% reported last month as inflation eased. Shoppers put more groceries in their baskets, but still kept a tight rein on spending as they continued to battle with high costs elsewhere including energy bills and the cost of borrowing.
The combined food and non-food figures meant total retail sales rose 1.1% in February, a slowdown from 1.2% in January and 1.7% in December.
Health and beauty, toys and home accessories such as cushions and cooking utensils were the few retail bright spots as families sought to find entertainment at home. Even above-average earners are tightening their belts in the face of high interest rates, which have started to affect more mortgages, car finance and other borrowing.
Households also turned to takeaways, fast food and streaming services as the south of England endured its wettest February on record, according to separate data from Barclays. Digital content and subscriptions experienced the highest growth (11.8%) in spending since August 2021, according to its consumer spend report, partly spurred by popular new series including Netflix’s One Day as well as the weather.
In contrast, spending in restaurants contracted 13.4%, a faster pace than January, while growth in spending at bars, pubs and clubs was at its lowest level (1.1%) since September 2022.
Karen Johnson, the head of retail at Barclays, said: “February’s wet weather meant Britons chose to spend more time indoors, resulting in a slowdown in high street and hospitality spending. This shift in behaviour meant ‘insperiences’ enjoyed a boost, as consumers opted to enjoy cosy nights in with a TV show and a takeaway.”
The slowdown has hit hospitality businesses as they struggle with high energy bills, increased staff wages and continued food price inflation, leading to a net 3,000 licensed premises closing last year according to research from CGA and AlixPartners. Leading hospitality groups, such as nightclubs, restaurants, hotels and pubs, achieved sales growth of just 0.1% last month amid rising costs.
Helen Dickinson, the chief executive of the BRC, which represents most big retailers, said the near-record rain of February had translated into a particularly poor month of sales growth: “Not even Valentine’s Day lifted customers out of the gloom, and gifting products that typically sell well, like jewellery and watches, failed to deliver.”
The poor retail figures add to pressure on already struggling fashion brands such as Superdry, Asos and Boohoo as well as household good specialists such as Currys and John Lewis.
Online clothing specialists are being hit particularly hard, with the figures showing that shoppers continued to direct more of their non-essential spending to physical stores despite the bad weather. The proportion of non-food bought online dipped to 35.7% in February from 36.1% a year before as shoppers tried to save on delivery and returns charges.
Linda Ellett, the UK head of consumer markets at the advisory firm KPMG, said cuts in national insurance rates introduced in January, which were intended to increase individuals’ spending power, had so far failed to feed through to the high street.
“As many households continue to adapt budgets to meet higher essential costs, including higher mortgage rates, consumer reluctance to get out there and start spending is likely to remain in the short term,” she said.
She added that retailers would be “pinning their hopes on some good news in the chancellor’s spring budget this week to help kickstart a spending revival on the high street” as they continued to be squeezed by lower demand and faced increases in labour costs and business rates in April.
