High street sales fell by 1.25% in May

Total like-for-like retail sales in discretionary categories fell by -1.2% in May, compared to a positive base of +2.3% in the same month last year, according to BDO’s latest High Street Sales Tracker.

The decline was driven in part by the fall in non-store retail sales, which dropped by -3.1% compared to May 2024. This is the first negative result in online sales since March 2024, outside of Black Friday in November last year.

All discretionary categories saw poor performance in May. Indicators were well below inflation, suggesting that retail businesses are feeling the bite of the cost increase in their overheads.

Overall fashion sales were down -2.0% from a base of +5.6, largely due to a significant drop in online fashion sales, which fell by -4.5% compared to the same month last year. Elsewhere, the homewares sector saw sales fall by -3.1% from a negative base of -2.6% in May 2024. This is the third consecutive month of negative online homewares sales (-10.8%).

Sophie Michael, Head of Retail and Wholesale at BDO, said “This is a hugely disappointing set of results for the retail sector as we head into the summer months. Retailers have been predicting the inflationary cost challenges for some time and, unfortunately, we’re now seeing them have a real impact.

“The steep fall in non-store sales shows just how difficult it has become for retailers to offer the big discounts that typically drive online sales. With mounting cost pressures from inflation, higher wages and increased operating costs, many are simply unable to cut prices on their products. As a result, volumes are down across every category and channel, with both in-store and non-store sales falling well below the rate of inflation on a like-for-like basis, while the absolute growth figure in online even falling into negative territory.

“National Insurance changes, increases to the National Living Wage, packaging tax and higher business rates are all bedding in now. At the same time, consumer confidence has dropped to its lowest level in five years, with people pulling back on discretionary spending.

“There’s no quick fix for this. Retailers are being squeezed on both sides, by higher costs and weaker consumer demand, meaning it is ever more pressing for them to remain focused on where capital and headcount investment is essential while managing their overhead expenses and stock purchasing.”

Weekly figures underline the poor performance in May. Modest growth of just +0.25% in week one was followed by three consecutive weeks of decline. The sharpest fall in sales figures came in week two, down -3.33% compared to the same week last year, driven by continued weakness in online sales. Week three saw declines across all categories, while week four ended the month with a further drop of -0.84%.

Oliver Vernon-Harcourt, Head of Retail at Deloitte, said “The retail sector has seen surprisingly strong growth since the start of the year, with April’s retail sales results representing the fourth consecutive month of higher than expected growth. The combination of the long Easter weekend, and a sustained period of good weather, has boosted shoppers’ sentiment and encouraged spending – especially in the DIY and home related categories.

“While consumer confidence remains somewhat fragile, rising wages and lower mortgage rates have improved household finances, but inflationary pressures persist. Previous economic challenges have also left shoppers more nervous, and emerging global economic uncertainties will be the litmus test to both the sector and consumers’ resilience.

“Looking ahead, with two May bank holidays and the lasting warm weather, retailers will hope the positive spending trend continues. Consumer spending will likely increase as socialising and enjoying the outdoors fuels spending on food and entertaining.”