December strong for British retailers but future looks bleak

The UK retail sector performed strongly in December but the British Retail Consortium (BRC) is warning the strong numbers do not indicate a recovery in 2012.

On the like-for-like (LFL) measure, which compares shops that have been open for at least 12 months, sales for December 2011 were 2.2% higher than the previous year.

It's worth remembering that in 2010 snow fall caused a like-for-like drop of 0.3%. This is one factor which makes 2011 look good.

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On the "total" measure, which includes all new shops, sales were up 4.1%, against a 1.5% increase in December 2010.

Stephen Robertson, the Director General of the BRC sounded a note of caution, however:

"A better than hoped for December closed a relentlessly tough year for retailers, but these figures hinged on a dazzling last pre-Christmas week and were boosted by some major one off factors. We're not witnessing any fundamental change in customers' circumstances."

He added that retailers may have sacrificed their bottom lines to achieve sales: "Discounting was deeper and started earlier and the vital Saturday Christmas Eve added another big trading day to the final run-up. With discounting driving sales at the expense of margins the key question for retailers is about earnings from those sales."

Helen Dickinson, the Head of Retail at KPMG, said no one should read too much cheer into the December numbers: "... it must be noted that these results have come at the end of a year which witnessed declines in most non-food sectors and are against December 2010's weak figures, which saw sales badly affected by poor weather. Sadly no-one expects this level of demand to be indicative of the year ahead."

BS