Post-pandemic spending bubble bursts as shoppers rein in spending

Total revenues slipped 1.1% year on year during May, the BRC-KPMG retail sales monitor showed, but was still 6.2% ahead of 2019.  

However, the decline by value “masked a much larger drop in volumes once inflation is accounted for” and the BRC warned of a likely squeeze on retailers’ profitability.

Like for likes fell 1.5% year on year over the period, which was worse than the three-month average decline of 1.1% and 12-month average growth of 1.8%.

Food sales fell 1.3% on a like-for-like basis and 0.7% in total on a three-month basis, while non-food revenues decreased 1% like for like but rose 2% in total.

BRC chief executive Helen Dickinson said: “Sales continued to see declines as the cost-of-living crunch squeezed consumer demand. 

“Higher-value items, such as furniture and electronics, took the biggest hit as shoppers reconsidered major purchases during this difficult time. Nonetheless, fashion and beauty did well as people prepared for holidays abroad and the summer social calendar with red, white and blue outfits adorning shopping carts ahead of the jubilee weekend. 

“Online sales appear to have stabilised at a ‘new normal’ with the share of total non-food retail sales coming through digital channels settling at around 39% compared with 30% pre-pandemic, though this is well down on lockdown peaks.

“It is clear the post-pandemic spending bubble has burst with retailers facing tougher trading conditions, falling consumer confidence and soaring inflation impacting consumers spending power.

“Supply chain issues including rising commodity and transport costs, a tight labour market and higher energy bills are forcing retailers to increase their prices, contributing to wider inflation. Profits may be squeezed further as retailers continue to find efficiencies in their own operations and supply chains to reduce the impact of future price rises for consumers.”