Bad weather drives food sales down 3.4% in December, reports ONS

Bad weather hit sales of food in December 2010 with retail sales down by 3.4% – the biggest fall on record, according to the Office for National Statistics.

Non-food stores increased by 3.1% with rises across all sectors except household goods stores, which decreased by 8.6% – the sixth consecutive fall. The largest rise was other stores at 10.2%. Non-store retailing increased by 14.5%.

Knight: lower volumes but more sales at full margin?

Commenting on the figures, Barry Knight, head of retail at Grant Thornton UK LLP, said: “The Christmas season provided a mixture of fortunes for the retail sector with the snow and looming VAT increases having a significant impact on trading patterns.

“The cold benefited outdoor clothing retailers such as Blacks, who saw an increase in like-for-like sales in December as consumers purchased warm jackets. Their high street presence captured those unable or unwilling to get in their cars.

“The ability to ‘one-stop shop’ also helped supermarkets and department stores, as proved by House of Fraser’s and Sainsbury’s (in particular non-food) results, as shoppers avoided trudging from store to store in the cold.

“Today’s announced results with a 2% increase in sales values across the sector as a whole may look alright on the surface but, relative to the rest of the year, not particularly sparkling and we need to look behind the figures.

“In December 2009 the VAT rate stood at 15% while in 2010 it was increased to 17.5%, undoubtedly impacting the bottom line. In addition, given how high inflation is, the net increase in real sales will be markedly lower than that announced.

“I am not sure we will get a true picture as to what has happened until there is clarity around achieved margin. In previous years, retailers started to introduce discounts reasonably early in December as they started selling stock and looked to clear slow moving lines.

“Due to persistently bad weather conditions and travel disruptions keeping shoppers away, sales analyses to base discounting on were not readily available. Although overall this may have meant a reduction in sales volumes, it may have allowed for more sales at full margin.”