UK discretionary retail sales tepid but fashion is stronger

UK retailers saw moderate discretionary sales growth ahead of the key Golden Quarter trading period in September, BDO’s High Street sales Tracker (HSST) showed on Friday.

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Total like-for-like (LFL) retail sales in-store and online grew by 3.1% — less than 4.7% seen this time last year but not disastrous even though discretionary spend growth remains below inflation meaning sales volumes are down.

In-store sales were the drivers this time as physical stores saw sales growth of 3.7% year on year. This was one of the highest figures so far this year and follows on from August’s positive performance when in-store sales grew at their highest rate in two years. 

However, sales online grew by just 3% in September, compared to a very strong base of an 11.6% rise in September 2024.

The discretionary categories BDO tracks are fashion, homewares and lifestyle and fashion outperformed. Total LFL retail sales in the sector grew by 4%, with in-store LFL sales growing by 6.4%.

Sophie Michael, Head of Retail and Wholesale at BDO, said: “These results will be seen as a positive trend as we move into the critical golden quarter, particularly given the exceptionally tough economic backdrop.

“However, the timing of the Budget, two days before Black Friday, could have significant implications for the retail sector. Retailers were caught out last year with the higher-than-expected [National Insurance] hikes combined with the impact that the Budget had on consumer confidence. There is no doubt that investment decisions are being deferred even further as businesses await the forthcoming Budget and understand its bearing on their short and medium term cashflows. 

“Reports elsewhere also suggest that there are reduced orders being placed with suppliers as retailers fret over the level of spending. At the same time, consumers will be approaching their spending choices with caution; the speculation and noise around the Chancellor’s Budget may cause the shopper to tighten their belts. Depending on the outcome, December will be critical to the Christmas trading results.”