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Total in-store and online sales have dropped -1.3% in February, marking the fifth consecutive month of negative sales results, according to new data from BDO’s High Street Sales Tracker.
BDO’s data, which looks at sales across discretionary spend categories, showed that despite online sales growing by +2.9% compared with last year, in-store sales fell -2.0%, bringing the overall performance of the retail sector down into negative territory.
The fashion and homewares sectors also performed “very poorly”, with like-for-like sales declining -4.8% and -4.1% respectively. In-store sales were particularly poor for the fashion sector, down -8.2% compared with the same month last year. The lifestyle sector performed slightly better, with sales up +3.9% in February 2023.
Additionally, separate research from BDO’s bi-monthly survey of mid-market businesses found that more than two thirds (69%) of retail and wholesale businesses see high operating costs as well as the cost of borrowing, as “one of their most significant challenges over the next six months”. This is seen as “more of a concern” than supply chain issues or skills shortages.
Sophie Michael, head of retail and wholesale at BDO, said: “This run of negative like-for-like sales covers both the build up to Christmas, which retailers would expect to be their busiest and most profitable period, and the stock clearance period in the new year sales. Since we started tracking both online and in-store sales in 2017, the only time we’ve seen results this poor was during the 2020 Covid-19 lockdown period, when the majority of non-essential retailers were forced to remain closed.
“Retailers are facing a perfect storm with a sustained decline in consumer spending in discretionary categories and substantial increases in their operating and borrowing costs. While the stiff competition for consumers’ discretionary spend remains and retailers experience continued pressure on their finances, those that fail to adapt and adjust their business models to their customers’ demands will be at risk.”
Michael added: “Retailers will increasingly be challenging themselves and asking whether certain stores are viable, or if the costs of running their existing physical footprint is simply too high. We should expect to see more consolidation of brands and acquisitions over the next six months as a result.
“The chancellor faces a multitude of difficult decisions in this week’s Budget. What is clear is that the retail sector, which generates more than £110bn in revenues and provides almost three million jobs, will be hoping for some targeted support. The past few months have been marked by the failure of long-established retail brands, leaving notable gaps on UK high streets. Measures from the Government should aim to drive growth as we’re at risk of seeing more businesses collapse in a sector that is integral to society and the economy.”
