Skip Header

Retailers get a much-needed boost

Emma-Lou Montgomery

Emma-Lou Montgomery - Fidelity Personal Investing

Shoppers got the tills ringing in January, giving the beleaguered retail sector a much-needed boost.

Bargain-hunters looking for discounted clothes were in luck, as clothing prices fell by the most they have since August 2016. This prompted a 1% rise in the amount of clothes sold.

And that was just the turnaround the sector needed, after seeing clothing sales fall 0.7% over the usually-buoyant Christmas trading period. Overall, retail sales were 4.2% higher in January this year than the same time last year.

None

A torrid 12 months for the retail sector, which saw the collapse of so many high street names, countless shop closures and many more job losses, culminated in what has been described as the worst Christmas in a decade. So 2019 had little chance of starting out as ‘The Year’ for retailers. Or at least that’s what’s everyone had thought.

Instead, the data from the Office for National Statistics, told another story altogether. UK retail sales grew at a faster-than-expected rate in January. The volume increased 1% over the previous month, up from a revised 0.7% fall in December. Excluding automotive fuel, the volume of retail sales was up 1.3% over the previous month.

That meant the January annual growth rate in quantity bought was the highest it has been since December 2016.

The British Retail Consortium has noticed a similar trend. Its findings show that shops saw their fastest sales growth for seven months in January.

Of course, ongoing Brexit uncertainty and tepid wage growth could still keep the reins on consumer spending, but after all the gloomy news, the fact that shoppers have put their hands in their pockets and spent at the tills, will undoubtedly be welcomed by retailers.

While today’s data also caught analysts unaware, it also threw up something of a surprise within the retail sector too. Traditional bricks-and-mortar retailers have been perceived to be most at risk, because of sales lost to online retailers. However, today’s data reveals a twist in the story, showing that the proportion of online sales as a total of all retailing in fact decreased to 18.8% in January from 19.8% reported in December.

It was only in the food sector that online sales rose. Here they went up from 5.7% in December to 5.8%. While the quantity bought in food stores in January returned to the strong growth experienced in the summer months at 3.2%, after a general slowdown throughout the year. Whether that is again a result of shoppers stocking-up ahead of the 29 March remains to be seen.

As an investor, knowing whether to invest or not in a particular sector, during times of uncertainty like we’re in now, can be challenging. This may be starting to sound like an overplayed song, but the truth is diversification matters; especially during times of volatility. It’s also important to remember that volatility can also provide buying opportunities - so just like the retailers, it’s important to stay nimble and be adaptable when it comes to your investment decisions.

Important information

The value of investments and the income from them can go down as well as up, so you may get back less than you invest. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser.