Retail sales in the UK experienced a significant boost in November, signaling strong consumer spending in preparation for the upcoming holiday season. According to the Office for National Statistics (ONS), sales volumes increased by 1.4% compared to the previous month and by a notable 7.2% compared to pre-pandemic levels in February 2020. Sales values also saw a substantial rise, with a 10.8% increase from October and an 11.6% increase from the pre-Covid period. It is worth noting, however, that a portion of this growth may be attributed to the rapid inflation rates, particularly for essential items like petrol.

One of the most encouraging aspects of November’s retail sales was the impressive performance of clothing stores. These stores saw sales volumes surpass pre-pandemic levels for the first time, experiencing a 3.2% increase compared to February 2020. Non-food stores, in general, witnessed a growth of 2% month-on-month, driven by the strong performance of clothing stores (+2.9% compared to October) and other non-food establishments (+2.8%), including computer, toy, and jewelry stores. Retailers reported robust trading during the Black Friday period and the lead-up to Christmas.

Despite the promising November sales data, it is important to consider the potential impact of the newly emerged Omicron variant. The discovery of this variant has injected uncertainty into the equation and may render the November data outdated. Karen Johnson, Head of Retail & Wholesale at Barclays Corporate Banking, expressed disappointment with the figures, highlighting that consumers were still motivated by discounts during the Black Friday period, despite high inflation. Johnson also underscored that early festive spending fell short of retailers’ expectations, and the cancellation of Christmas parties across the UK might lead to increased returns of partywear items sold in November.

Looking ahead, retailers are understandably concerned about how the Omicron variant will affect consumer confidence. While Covid-19 concerns would typically drive consumers towards online shopping, issues related to delivery and product availability might prompt them to opt for brick-and-mortar stores for their last-minute Christmas shopping. Additionally, retailers are grappling with rising costs and must decide whether to absorb them or pass them on to consumers.

The ONS report pointed out that department stores continued to face challenges, with sales volumes declining by 0.2% compared to the previous month and remaining 3.4% below pre-pandemic levels. Moreover, the proportion of retail sales occurring online dropped to 26.9%, the lowest since March 2020, continuing the downward trend from its peak in February 2021. The impact of the Omicron variant on online sales in specific fashion-related sectors remains uncertain, but these sectors continue to hold a significant share of the online spending market.

In November, online sales accounted for 27.5% of total sales at department stores, experiencing a year-on-year decrease of 26.9%. However, they did see a 1.4% increase compared to the previous month. E-sales at textile, clothing, and footwear retailers represented 25.9% of total sales in November, with a year-on-year decline of 5.9% but a slight increase of 0.6% compared to October.

Useful Links:
BBC: UK Retail Sales Surge Ahead of Christmas
ONS: Retail Sales, November 2021