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Total retail sales in discretionary spend categories grew by 7.1% in January amid concerns that 2025 is set to be another “difficult” year for retail as rising costs continue to mount, according to BDO’s latest High Street Sales Tracker.
The latest report from BDO shows that the 7.1% growth comes off the back of a “very weak” set of results in January 2024 (-0.8%) and was largely driven by significant growth in online sales, which grew by 15.5% compared to the same period the previous year.
Meanwhile, sales in bricks and mortar stores grew by just 3.2%, from a poor base of -4.2%, serving as a reminder that high street retail is struggling to recover from the trends experienced in 2024. These results indicate a large drop in volumes over the past two years.
Fashion and homewares retailers faced particularly challenging conditions, with sales in-store growing by 3.3% and 3.4% respectively against “very poor” performances last year of -6.7% and -10.1%.
BDO said that January’s poor weather may have contributed to mixed footfall on the high street and driven a better result for online sales, but this is also a continuation of the sector’s overall “poor” performance in 2024 and a “disappointing” final Golden Quarter.
Sophie Michael, head of retail and wholesale at BDO, said: “These results may seem positive on the surface, but the underlying numbers show that the weak growth in the run up to Christmas has continued into the new year. While many retailers may have seen a rise in sales through the release of some of the pent-up consumer spending that didn’t come through before Christmas, January trading for discretionary spend requires heavy encouragement through discounting; this delayed spending will no doubt have a significant impact on already thin margins.
“The sector has been challenged for some time by the impact of significant cost increases, which will continue to mount throughout the year, particularly post the implementation of the changes in the budget this April.”
She added: “Retailers need to find a way to balance the increased cost of doing business while investing in product development, customer service and underlying technology, like AI, that will maintain their competitiveness. They need clear visibility on how their costs will increase to identify effective actions to mitigate the impact.
“This includes clarity over how their supply chain costs will rise, with many of the businesses they rely on being subject to some of the same pressures as themselves. The sector already saw a high number of job losses in 2024 and retail store closures; with the oncoming cost increases, these numbers are unlikely to ease in 2025.”
