Fashion retail struggles in March as consumers tighten belts says BDO
News this week that March’s retail footfall dropped was added to on Thursday by further news about actual retail sales… and that news wasn’t good, especially for fashion.
The regular BDO High Street Sales Tracker (HSST) said that “March was a challenging month for UK retail, as inflation and a dip in consumer spending hit sales. The fashion sector suffered its worst performance in over two years,” with in-store sales specifically down 0.4% year on year. That’s despite something of a resurgence in physical retail over recent months.
And BDO’s head of retail, Sophie Michael, said that “retailers are being squeezed on two fronts: consumer spending is falling, while they’re having to increase prices on their own products. All this adds up to lower sales volumes”.
Diving deeper into the figures, total retail like-for-like (LFL) sales across all categories grew by 4.1% compared to March 2022 while online sales grew just 2.8%, definitely not making up for their 10.8% drop of a year ago. But at least total in-store LFLs climbed by 6.6% in the month, from a strong base in March 2022.
Yet whichever way you look at it, the fact is that sales were lower than the rate of inflation, so effectively the March performance represented a decline.
Sophie Michael added that “across the board, inflation is above 10%, and for food it now stands at a staggering 18%. This is eating into consumers' discretionary spending and is bad news for the fashion, lifestyle, and homewares sectors, as we can see in the results.”
It’s all such a shame as March had begun so well with total LFLs growing by 11.03% year on year. But they slowed in the second week to +8.3%, partly due to bad weather across much of the UK. The third week of the month, which included Mother’s Day, saw a slight rebound, with total LFLs up 10.54%. However, these gains were partly wiped out by a very disappointing final week, when sales fell by 11.67%. While that week in 2022 had included Mother’s Day, which may have contributed to the 2023 fall in LFL sales, it’s still a discouraging note for retailers on which to end the month.
As for that fashion sector underperformance, total LFLs grew by just 0.7% in March, and as mentioned, in-store sales were particularly disappointing, with that 0.4% drop.
BDO said the lifestyle category saw the best performance of any sector, with total LFL growth of 9.7%, although even that was still below the rate of inflation. Consumers buying gifts across health and beauty ranges for Mother’s Day may have helped to spur some of this growth.
Sophie Michael believes the impact of inflation is “really challenging for retailers, particularly in discretionary spend categories. Consumers simply have much less money to treat themselves because of increasing prices for essentials, which is therefore taking a bigger slice of their purse and reducing their spending power on discretionary spend categories such as fashion. Inflation is now rising rapidly in these categories, particularly in the fashion market, which saw prices rise by 8% in the year to February, up from 6.2% in January.”
And she added that while “like-for-like sales may be positive, giving some hope to the retail sector, the broader picture is a negative one. Consumer confidence remains stubbornly low, many home-owners will soon come off fixed-rate mortgages onto much higher interest rates, and inflation on essentials is not easing. Against this backdrop, retailers will need to provide a highly attractive product and exceptional customer experiences, both in-store and online, to persuade consumers to part with their increasingly stretched purse, while the retailers’ own operational costs continue to rise.”
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