December sales cheer for retailers

After a tough year for the UK high street, official figures show sales increased by 0.6% in December as retailers slashed prices and started the January discounts early.

by Elizabeth Anderson
Last Updated: 06 Nov 2012
Sales volumes rose by 0.6% between November and December and increased by 2.6% on the year, data from the Office for National Statistics shows. Meanwhile the value of retail sales rose by a respectable 6.2% on December 2010 figures. Petrol and textiles, clothing and shoes were the biggest drivers, with sales rising 11.2% and 6.3% respectively. But the news wasn’t so good for shops selling household products, where sales fell 3.6%, while sales at other stores also dropped 1.9%.

But retailers will be feeling far from feeling cheerful despite these encouraging figures, as the uplift came at a hefty price. Margins were squeezed by discounting at an average of nearly 50% in December. Tesco reported earlier this month that sales at UK stores open over a year fell 2.3% over the festive period, and CEO Philip Clarke admitted that the supermarket giant had ‘seen more strain than anticipated on our profitability during the important seasonal trading period’. HMV, Game and Dixons also reported a slump in sales. Others fared even worse: Peacocks, Past Times and La Senza have gone into administration this month following a tough year and heavy debt.

For some though the outlook is more positive. John Lewis said today that sales rose by almost 10% in the week to January 14, compared to the same time in 2010.  Ikea is also toasting a year of healthy profits. The Swedish flat-pack connoisseur said profits jumped 10.3% last year thanks to a rise in sales. Net profit rose to €2.97bn (£2.5bn) in the year to the end of August and revenue rose 6.9% to €25.17bn, even as the economic troubles in key markets in Europe continued to bite.

Yet despite the sales boost in December, many retailers will be uncertain about the market this year. Heavy discounting can only last so long - once January ends, retailers will have to find other ways to entice shoppers into their stores…

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