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UK retail sales fell back 1.1% in May as the cost-of-living crunch blunted consumer demand and consumers shunned higher value items.

The BRC-KPMG Retail Sales Monitor found that, on a total basis, sales decreased by 1.1% in May, against an increase of 28.4% in May 2021, which is worse that the three the 3-month average growth of 0.7% growth and the 12-month average growth of 4.1%.

Sales were down 1.5% on a like-for-like basis having increased 18.5% a year ago, which again was below the 3-month average decline of 1.1% and the 12-month average growth of 1.8%.

Over the three months to May, Food sales decreased 1.3% on a like-for-like basis and 0.7% on a total basis, albeit food was in year-on-year growth in May.

However, non-food retail decreased by 1.0% on a like-for-like basis and increased 2.0% on a over the three month period and was in decline in May.

Online non-food sales decreased by 8.5% during May, compared with a decline of 8.1% in May 2021.

BRC chief exec Helen Dickinson commented: “Sales continued to see declines as the cost-of-living crunch squeezed consumer demand. Higher value items, such as furniture and electronics, took the biggest hit as shoppers reconsidered major purchases during this difficult time.

“It is clear the post-pandemic spending bubble has burst, with retailers facing tougher trading conditions, falling consumer confidence, and soaring inflation impacting consumers spending power. Supply chain issues including rising commodity and transport costs, a tight labour market and higher energy bills are forcing retailers to increase their prices, contributing to wider inflation.

“Profits may be squeezed further, as retailers continue to find efficiencies in their own operations and supply chains to reduce the impact of future price rises for consumers.”

Paul Martin, UK Head of Retail at KPMG, added: “For the second month in a row UK retail sales declined, highlighting that consumers are becoming more sensitive to the cost of living.

“The rising cost of living is going to remain the main story for retailers for the immediate future, with consumer confidence a key factor to watch out for. Retailers will be hoping that a post-Jubilee and summer feel-good factor begins to improve confidence amongst some shoppers – as presently overall confidence levels are lower than sales may suggest.

“Cost and efficiency will firmly be top of agenda for most operators, and understanding how they can protect their margins whilst remaining price competitive for consumers.”

IGD CEO Susan Barratt, commenting on food and drink sector performance, added: “Whilst the last four weeks show modest growth, we increasingly expect that value sales are being boosted by inflation this year and that underlying volume trends are weaker as shoppers economise to manage the cost-of-living challenges they face.

“Shoppers are finding it incredibly tough right now, and although the Chancellor’s announcement of a cost-of-living support package may have offered some respite, our Shopper Confidence Index data for May shows that shopper confidence is still incredibly low. Spending priorities are changing rapidly in reaction to continuous price rises, with shopper coping strategies differing by individual life circumstances.

“We anticipate the Jubilee may provide a welcome break and opportunity to celebrate with friends and family, with a third (30%) planning to celebrate over the Bank Holiday weekend. However, shoppers face a challenging few months ahead as they look to contend with the rising cost of living.”

Morning update

On the markets this morning, the FTSE 100 has edged down 0.1% to 7,601.4pts so far.

Early risers include Parsley Box, up 5.6% to 19p, McBride, up 5.5% to 30.9p and British American Tobacco, up 1% to 3,567.5p.

Fallers include Nichols, down 3.5% to 1,255p, Greencore, down 2.7% to 111.5p and Marks & Spencer, down 2% to 147.8p. 

Yesterday in the City

The FTSE 100 opened the week up 1% to 7,608.2pts.

Tech-focussed stocks were amongst the risers, with Just Eat up 8.6% to 1,859.8p, Deliveroo, up 8.6% to 99.4p, Parsley Box up 5.9% to 18p and Ocado, up 4.7% to 951.4p.

Other risers included Greencore, up 4.5% to 114.6p, Coca-Cola HBC, up 4.3% to 1,775.5p, Coca-Cola Europacific Partners up 3.1% to €50.45, C&C Group up 2.4% to 200.6p, Diageo, up 2.3% to 3,704.5p, and Britvic, up 2.1% to 823p.

The day’s fallers included McBride, down 5.5% to 29.3p, Glanbia, down 2.8% to €11.09, SSP Group, down 1.2% to 266.3p, Bakkavor, down 1.2% to 99p, Naked Wines, down 0.8% to 360.8p.