Silvia Rindone, EY UK&I Retail Lead, comments:
“Although retail sales volumes marginally increased by 0.5% month-on-month in January, largely due to promotional activity, when looking at the bigger picture, sales volumes fell by 5.7% in the three months to January when compared with the same period last year.
“While not unexpected during what is, traditionally, a quiet trading period, the backdrop of rising inflation and falling consumer confidence means today’s figures are likely to be a sign of things to come. The latest EY ITEM Club Winter Forecast warned that the UK is set for a deeper recession than previously thought with consumer spending likely to fall 1.4% this year followed by growth of 2.3% in 2024.
“Christmas trading updates from retailers over the last few weeks have been varied and reflect a highly pressurised market in which companies are competing for the same share of squeezed wallets amid rising costs and overheads. These headwinds are having a real impact on bottom lines as the findings of EY-Parthenon’s Profit Warnings analysis for 2022 found. FTSE Retailers issued the highest number of warnings of any sector during the year, with almost half (48%) issuing a warning in 2022.
“With consumers likely to continue tightening household budgets in 2023, it will be critical for companies to keep adapting and reflecting customer priorities, which for most consumers in the short-term will be a compelling price proposition. Retailers and brands also need to think about stakeholder confidence, as well as consumer confidence. The support of shareholders, lenders, landlords, pension trustees and credit insurers is critical in difficult times, when confidence is lost far quicker than it is gained.”