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UK Christmas Sales Are Off to Weak Start on Delayed Spending

Shoppers on Oxford Street, London.
Total sales grew 2.7 percent in November, compared with 4.2 percent growth a year earlier. (Shutterstock)

UK retail sales were sluggish in November as Black Friday discounts failed to lure droves of shoppers struggling with the burden of the higher cost of living.

Total sales grew 2.7 percent in November, compared with 4.2 percent growth a year earlier, the British Retail Consortium and consultancy KPMG said in a report Tuesday. Sales of non-food items declined, with shoppers particularly avoiding expensive categories including jewellery and watches.

Christmas is off to a weak start for retailers relying on the crucial period to boost their sales. Festive spending is forecast to drop 13 percent to £20 billion ($25 billion) this year, according to a separate survey by PwC that was also released Tuesday.

“The cost-of-living crisis has taken its toll on Christmas spending for many households, and the continued economic conditions are testing consumer resilience,” said Paul Martin, UK head of retail at KPMG. “We are likely to see a prolonged and well-targeted period of discounting as retailers compete hard for a shrinking pool of spend and will need to clear stock.”

Black Friday started earlier than usual this year and initially gave a much-needed sales boost to retailers, but the momentum failed to last through the month, said Helen Dickinson, chief executive officer of the BRC.

“Retailers are banking on a last-minute flurry of festive frivolity in December,” she said.

There’s a chance shopping may heat up as the number of people saying they will spend less this Christmas season has dropped to 18 percent from 30 percent in September, PwC said. The consultancy said most people will do the bulk of their present-buying during the first two weeks of December.

Grocery shopping is a different story. Data cruncher Kantar forecast that Christmas grocery sales may reach a record this December, exceeding £13 billion partly because prices of food and drink are still rising, though at a slower pace. Grocery price inflation was 9.1 percent in the four weeks to Nov. 26 versus 9.7 percent the previous month.

Grocers are competing especially on the price of ingredients for Christmas meals, which has risen 1.3 percent to £31.71, significantly less than the main inflation rate, according to Kantar. Consumers will buy on average 10 percent more items than in a typical month as they host family and friends.

Away from food, retailers may struggle with excess inventory, leading to big January sales. KPMG warned there could be further casualties in the retail sector, particularly among pure online businesses which have faced more than 28 consecutive months of sliding sales.

There’s been a long line of British retailers that have struggled with the cost-of-living crisis following pandemic shutdowns. The past year has seen insolvency filings from low-cost retailer Wilko, fashion and homeware business Cath Kidston, online furniture brand Made and fashion chains Joules and M&Co.

Retailers will also face growing cost pressures next year due to a rise in business rates and increase in the minimum wage.

By Katie Linsell

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