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There was a stronger performance from the food sector compared to non-food

Retailers have suffered their worst Christmas for a decade according to new figures from the BRC and KMPG.

In a week of crucial results for a raft of major retailers, the organisations’ retail monitor recorded total sales growth of 0.0% in December, compared to a 1.4% increase 12 months ago.

The gloomy figures also showed the lowest monthly growth since April, excluding Easter distortions, and were below the three-month and 12-month averages of 0.5% and 1.2% for the year respectively, making them the worst December results since 2008.

However, whilst the figures set alarm bells ringing across the retail industry, there was a stronger performance from the food sector compared to non-food sales.

Over the three months to December, food sales increased 0.6% like for like, although this was below the monthly average growth of 3.1%.

Yet the overall results led to calls from retail leaders for urgent help from the government.

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“Squeezed consumers chose not to splash out this Christmas with retail sales growth stalling for the first time in 28 months,” said Helen Dickinson, BRC chief executive.

“The worst December sales performance in 10 years means a challenging start to 2019 for retailers, with business rates set to rise once again this year, and the threat of a no-deal Brexit looming ever larger.

“The retail landscape is changing dramatically in the UK, while the trading environment remains tough. Retailers are facing up to this challenge but are having to wrestle with mounting costs from a succession of government policies - from the apprenticeship levy to higher wage costs to rising business rates.

“Growth in food did provide a glimmer of hope, being among the few categories to notice an uptick,” said Paul Martin, UK head of retail at KPMG.

He said the figures came despite “desperate” retailers’ attempts at price slashing which he said had “seemingly not been enough to encourage shoppers”.

He added: “The continued contrast in performance between the high street and online remained evident in December - albeit 2018 did also see a continued slowdown in online retail sales.

“The first months of 2019 will unlikely hold much improvement. As many retailers report their festive trading performance, the list of winners and losers will become clear, but winning means more than just improving sales. Retailers have to protect their margins in order to deliver a profitable festive season.”

The grim news from the BRC comes amid mixed results from food retailers so far this week.

Yesterday Sainsbury’s blamed “cautious consumer spending” for a 1.1% fall in like-for-like sales over the Christmas period and said the outlook remained “uncertain”.

Morrisons reported a like-for-like festive sales jump of 3.6%, though its core retail business grew by a more modest 0.6% and CEO David Potts said consumers reigned in their spend amid anxiety over Brexit.

However, on Monday Aldi said the week beginning 17 December was the busiest in its history, with sales up 10% on the previous year.

Richard Lim, chief executive of Retail Economics, said the high street in particular was facing a brutal 2019.

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“These results are worse than we’d feared and hammer home the message that all is not well on our high street,” he said.

“In the face of Brexit uncertainty, a gloomier economic outlook and underlying debt worries, shoppers tightened belts as their appetite to spending faltered.

“The ongoing shift towards online shopping made life difficult for retailers over-exposed to high streets with dwindling levels of footfall. What’s more, the extraordinary level of discounting in the run-up to Christmas would have quickly eroded margins during the industry’s most vital period. Inevitably, this will have left many retailers in a more precarious financial situation heading into 2019.”

Shore Capital analyst Clive Black said December had been a “poor but not disastrous month for UK retailing”.

“The main casualties seemingly reported before Christmas Day. Since then the updates from the major retailers have mirrored this view; challenging but not a car crash.

“What was very problematic indeed was October and November, for the whole trade but especially non-food store-based shopkeepers, which meant that many, perhaps most retailers went into December behind plan.

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“Thankfully, the two to three weeks ahead of and around Christmas prevented a disaster scenario. Whilst there is full employment and real incomes are rising in the UK, the stoicism of the British shopper is seemingly being broken by the macro-political shenanigans. The sooner the political chaos in the UK is broken, the better - the longer that chaotic position persists, the more damage will be done.”

Speaking exclusively to The Grocer, high streets minister Jake Berry admitted the performance of retailers over Christmas was a “mixed picture”.

He said: “There have been some retailers, such as Dunelm, that have performed extremely well but we have to face up to the challenges the retail industry is facing. Business rates are a very complicated area. We are looking at ways to level the playing field between bricks and mortar companies and online but it is complicated by the fact that there are retailers out there now for whom the mix between the two is 50/50.”