The “golden quarter” appears at first to have been not so much golden as decidedly bronze as figures released by the Office for National Statistics (ONS) show a surprise drop in sales in December. However, closer inspection reveals a more positive outlook.
December is traditionally a key month for retailers as they aim to maximize Christmas sales. However, according to the ONS, retail sales fell 0.3% last month. This was unexpected, as economists had forecast growth of 0.4%.
The December drop was due to a “very poor” month for food sales, which sank to the lowest level since 2013, hurting supermarkets in particular, the ONS said.
Richard Lim, Chief Executive at Retail Economics said, “Retail sales disappointed over the golden quarter, reflecting a tough trading environment. Cautious spending defined the festive season, slowing momentum in retail. Scars from the cost-of-living crisis saw fragile consumer confidence persist in December as shoppers adapted to higher prices, prioritizing value during the Christmas period.”
However, Jonathan de Mello, CEO at JDM Retail offered a more upbeat assessment, saying, “December 2024 was a good month overall for the U.K. retail sector, with many retailers that account for a sizeable proportion of the market—including Tesco, Sainsburys, M&S and Next—reporting strong like for like performance. This will have been boosted in part by Black Friday falling later in the year than in 2023, but even with this taken into account performance was still robust.
He continued, “Confusion around December retail sales stems from the ONS and their frankly bizarre decision to focus on ‘seasonally adjusted’ month-on-month sales volumes vs November. In attempting to account for not only Black Friday falling later, but also trying to strip Christmas itself out of the December figures, the ONS has produced numbers that are at odds with the rest of the market—and indeed basic common sense.
Looking at the raw ONS data—and taking their attempts at seasonal adjustment out of the equation – the fact is that month-on-month sales volumes were up by 37.5% in December 2024 vs November 2024—not down -0.3% as was widely reported. Their decision to focus on this erroneous -0.3% figure should be questioned. Whether the ONS like it or not, Christmas does indeed fall in December—as it has every year!”
Retail analyst Nick Bubb agrees, “Given the later fall of Black Friday, the year-on-year, non-seasonally adjusted sales value figures (excluding petrol) saw sales rise by 5.7% in December.”
Lim feels that consumers searched out promotions and ways to make their budget as flexible as possible, “Shoppers held out for promotions and turned to flexible payment options, including buy now pay later services, to stretch their budgets. Retailers outperforming were nimble in response to demand and invested in omnichannel operations, supporting online sales growing ahead of store sales in December.
“With retailers typically operating on low single-digit margins, weak growth leaves little room for maneuver as employer tax increases loom. This will inevitably widen the gap between retailers who can invest in operational resilience and those who cannot afford to—risking higher prices, hiring freezes, and store closures”, he continued.
And Silvia Rindone, EY UK&I retail lead, commented, “The overall fall in sales volumes was marginally offset by non-food sales volumes which increased by 1.1% in December. This, however, was driven by Black Friday sales and is unlikely to be a sign of sustained recovery. Clothing saw the largest increase, with volumes rising by 4.4%. The amount spent online during December also rose by 1.5%—the first rise since September 2024.”
As we head into 2025, despite a more positive outlook, retail will continue to experience a cautious consumer and an uncertain economy, with the headwinds of the autumn Budget measures looming ever larger.
