Sales volumes at UK clothing stores rose by more than 2% in May from the month prior, with feedback from some retailers suggesting the increase was linked to consumers shopping for summer holidays.

Official data released today (24 June) by the Office for National Statistics (ONS) shows clothing stores reported a monthly increase in sales volumes of 2.2% as consumers are planning holidays and therefore buying new clothes.

Overall retail sales volumes fell by 0.5% in May following a rise of 0.4% in April, revised from a rise of 1.4%. Retail sales values, unadjusted for price changes, rose by 0.6% following an increase of 1% in April. When compared with pre-coronavirus levels, total retail sales were 2.6% and 13.0% higher in volume and value terms, respectively.

Online spending values, meanwhile, were up by 1.7% when compared with the month prior, due to falls in non-store retailing (-3.5%) and department stores (-1.7%). 

The proportion of online sales fell to 26.6% from 27.1% in April. Despite the fall in May, the proportion of online sales remains substantially above its level of 19.7% in February 2020 before the pandemic.

Commenting on the May ONS retail sales data, Jacqui Baker, partner and head of retail at leading audit, tax and consulting firm RSM UK, notes May was the first month that households felt a pinch in their bills.

 “Consumer confidence fell to -41% in May, a record low, which won’t come as good news for retailers who are relying on people to spend. It’s no secret that consumers are feeling the pressure with higher energy bills in full flow and the cost-of-living crisis chipping away at household budgets. For many, spending will become increasingly dominated by the essentials, as opposed to luxuries.

“Despite this, in preparation for the summer holidays and events such as the Jubilee weekend, consumers took the opportunity to buy new outfits with clothing sales up 2.2% in May. It’s likely this will continue to be a key trend during the summer months, with more people switching away from purchasing household goods (down 2.3%), to spending on holidays and social events instead. The fall in household goods was compounded by an increase in the price of goods, up 50% more than other retail sales categories.”

Thomas Pugh, economist at RSM UK, adds: “‘The surge in inflation and subsequent slumps in households’ real incomes and consumer confidence doesn’t bode well for retail sales over the next year. However, the silver lining is that total spending is still rising, the value of retail sales rose by 5% year on year in May. This suggests that consumers are still willing to go out and spend, but they just aren’t getting as much for their money. Sales volumes were down by 4.7% year on year in May.

“This suggests retail sales will slow rather than collapse. Indeed, there are three key reasons why sales might hold up. First, households have a pot of savings worth almost 15% of GDP to draw down to help combat inflation. Second, the extremely tight labour market makes it unlikely that the unemployment rate will jump sharply. Third, additional government support will start to support lower-income households in the second half of the year.”

Meanwhile, Lynda Petherick, retail lead at Accenture in the UK and Ireland says today’s slight drop in sales won’t come as a surprise to a sector contending with rapidly rising costs, as well as pressure to keep prices low for struggling households.

“Inflation remains a key issue for retail businesses, who are having to grapple with growing supply chain costs, as well as keeping their stores afloat and staff well compensated. For consumers, rising costs for staple goods mean many don’t have excess money to spend on discretionary items,” she adds.

“There have been calls to help consumers by keeping prices down, which will be easier said than done for retailers. Increasing costs will have left many firms short this summer, particularly at a time when customers are usually spending more. Retailers with the right technology in place to help keep costs down whilst delivering a good customer and employee experience are more likely to weather the storm than those who don’t.”

By Just Style