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Published
Jun 7, 2022
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Cautious UK consumers still buying fashion for now say spending reports

Published
Jun 7, 2022

Multiple UK consumer spending and retail spending reports that were released on Tuesday showed one general trend – categories that outperformed in the pandemic are struggling, inflation is a big factor in higher spending and consumers are reining-in discretionary purchases. But fashion isn't doing too badly in the circumstances at the moment, even if future prospects are unclear.


Photo: Pexels/Public domain



Figures differ across each report as they measure spending in different ways and look at different categories. 

The BRC/KPMG report looks at all retail spending and said overall retail sales fell for the second month in a row during May with a 1.1% drop compared to May last year. However, we have to remember that my last year saw a mini boom due to shops reopening in the middle of April. The report said big-ticket items were left on the shelves last month.

CONSUMER SPENDING 

Meanwhile, UK consumer spending (that is, not only spending at retail) via credit and debit cards rose 9.3% year-on-year last month, Barclaycard said. But that wasn't quite the buoyant news that it seemed. The payment cards giant said that the figure was inflated by surging prices and because demand for spending occasions (such as leisure activities) was artificially dampened this time last year due to some Covid restrictions still being in place.

Not only that, but some spending categories saw declines this time with consumers cutting back on things like subscriptions and dining out.

Barclaycard said spending on essential items rose 4.8%, largely due to inflation. Meanwhile, spending on non-essentials rose as much as 11.6%. However, much of this was due to hospitality and leisure spending and it was actually the smallest uplift in non-essential spending since March 2021.

As mentioned, the comparisons were difficult given that May 2021 had seen shoppers looking back to stores after the reopening of non-essential retail so demand back then would have been artificially inflated.

This had a big effect on sports and outdoor retailers, which saw a 19.6% decline year-on-year last month.

Yet the comparisons on a month-on-month basis look more attractive. Sports and outdoor retailers, for instance, enjoyed 4% growth on this basis as consumers bought their goods ahead of summer. And clothing retailers also saw growth compared to April (+8.6%), perhaps due to a combination of Britons updating their wardrobes for the summer, as well as increasing inflation.

But the fact that consumers are cutting back on some things – such as digital TV subscriptions – suggests the cost of living crisis is biting, which is bad news for the fashion sector (as well as for beauty) further down the line.

NON-ESSENTIAL RETAIL

Finally, like-for-like non-essential UK retail sales growth slowed in May, the latest BDO High Street Sales Tracker (HSST) said, also mentioning that consumers were putting off big purchases and even cutting back on their online retail addiction.

Its report said total like-for-like sales increased by 14% compared to May 2021, the lowest growth recorded for 15 months, while non-store like-for-likes rose only 4.9% compared to +9.4% a year ago.

Given that inflation was headed towards double figures in May, neither the total nor the online percentages looked particularly good.

But at least fashion saw the biggest growth, with total like-for-like sales increasing by 27.6% for the month, from a base of +83.3% for the same time last year. The fashion sector recorded a “steady performance across in store and non-store channels”, which contributed to the 15th consecutive month of positive total like-for-like sales for fashion.

But homewares — which was a star category during the pandemic — fell in double-digits.

Sophie Michael, Head of Retail and Wholesale at BDO, said: “Retail sales have been resilient recently, but [May] could be one of the first signs that consumers are beginning to reduce their discretionary spending as this unprecedented cost of living crisis takes hold. Data around homewares suggests consumers may be postponing larger purchases until budgets are under less pressure. The question is when this slowdown spreads to the other discretionary sectors, as consumers continue to tighten their belts.”

And she added that she’s seeing another worrying sign: “We are also seeing evidence of retailers cutting back on investment. With so much uncertainty on consumer spending patterns over the next few months, as well as more pressure on their bottom line from inflation and supply chain disruption, it is understandable that retailers are being cautious. However, they need to invest smartly in their products and services if they are to maintain sales and market share.”

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