The latest data released today (18 February) by the Office for National Statistics (ONS) shows a month-on-month drop in UK clothing sales in January, while overall retail sales volumes rose by 1.9%, following a fall of 4% in December 2021.

Sales volumes were 3.6% above their pre-coronavirus (Covid-19) February 2020 levels.

Clothing stores reported a fall of 5% over the month and were 12.6% below levels in February 2020. This may be linked to less discounting in January 2022 compared with other years as reported earlier this week.

Department stores reported a monthly increase of 7.1% in sales volumes but remained 8% below their February 2020 levels.

Meanwhile, online spending values fell in January by 4.5% when compared with December because of sharp monthly falls in food, clothing, and other non-food stores. Not all retail categories saw a fall in online sales though; department stores and non-store retailing both saw a small percentage increase.

The proportion of online sales fell to 25.3% from 27% in December, marking a continuation of a broad falling trend since its peak in February 2021 (36.5%). Despite the ongoing trend, the proportion of sales made online is still above its level of 19.8% in February 2020 before the pandemic.

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Recovering lost ground

Lynda Petherick, head of retail at Accenture in the UK and Ireland, notes the partial rebounding of sales in January suggests some new year enthusiasm among shoppers, with signs we are moving ever closer to traditional trading patterns in line with pre-pandemic levels.

“After a turbulent 2021, the sector has worked incredibly hard to recover lost ground from the early stages of the pandemic. With the lifting of nearly all Covid-19 restrictions, retailers will now be contemplating the next great unknown: the post-pandemic era.

“Normally a quieter trading month than December, January’s stronger performance will be welcomed by retailers, but inflationary troubles and the rising cost of living are likely to cast a dark cloud over the sector, particularly as households are beginning to keep a closer eye on their outgoings.

“Coupled with increasing fuel prices that impact logistics and a labour market that remains tight, firms are facing mounting pressure to maintain their margins. Nonetheless, this is a promising start to the year, and businesses will have to ensure they’re giving consumers every reason to continue shopping with them in the coming months.”

Richard Lim, CEO of Retail Economics, adds retailers saw a strong start to 2022 as sales volumes bounced back from December’s declines.

“As shoppers’ anxieties about Omicron softened, confidence to visit physical locations returned providing much-needed support for the high street.

“Across the board, non-food retailers saw strong growth against last year’s lockdown period. Consumer momentum continued in the home improvements and DIY sector, while there was also a sizeable boost in sales across apparel, furniture and electricals,” he notes.

“Looking forward, the industry continues to face a cocktail of challenges from ongoing supply chain issues and a softer backdrop for consumer finances. Spending power is already under intense pressure with inflation causing the biggest concern for consumers which is undermining confidence.”

Retailers avoid January blues

Meanwhile, James McDonald, retail partner at Deloitte, says today’s figures form the initial sketches of a more positive picture for retail recovery in 2022.

“Retailers avoided the January blues as consumers made use of end-of-season discounting. Both sales values and volumes recovered from December’s subdued performance, increasing by 2.0% and 1.9%, respectively. Year-on-year, values 6.5% and volumes 9.1% are also up, albeit this is not a like-for-like comparison with the UK under strict lockdown restrictions in January 2021, with all but essential stores closed.  

He adds despite worries about inflation, consumers continued to spend. 

“The loosening of restrictions has resulted in more consumers heading to the high street and boosting overall in-store footfall.”

Cost of living headwinds

However, the rising cost of living is firmly front of mind, McDonald says.

“The question is whether retailers will absorb growing costs or pass this on to the consumer, adding further strain to consumer pockets and impacting the industry’s speed of recovery. Finding ways to continue to entice consumers to spend in-store or online will be key to a sustained recovery for the retail industry. To aid this, many retailers are exploring new digital ways of engaging with consumers both online and in-store.

“This could prove pivotal in the months ahead as those consumers who are in a position to spend head out as the economy continues to open up.”

 Jacqui Baker, partner and head of retail at RSM UK, also points to the cost of living.

“January is a notoriously slow month, but after muted Golden Quarter due to the Omicron surge we are seeing a small rebound in consumer spending, but the cost of living crisis means that this uplift in sales might not last,” she warns.

“Consumer confidence is at its lowest level in 12 months, footfall is down, and mounting price inflation may curb future spending as fear of soaring energy costs, higher mortgage repayments, and increased petrol prices eat into household budgets. This all lands ahead of a pinch point as retailers will face increased costs from 1 April with average hourly rates and national insurance both increasing, at a time when the remaining Covid support measures come to an end.

“The next few months will undoubtedly be tough for UK retailers, so it will be interesting to see if the Government will step in and announce new measures to ease the cost of living crisis for consumers and introduce urgent business rates reform in next month’s Spring Budget. This would allow confidence to return; give retailers the chance to recover; and prevent further distress across the sector after a slow start to the year post-Omicron.’