As shoppers cut discretionary spend, May retail sales disappoint – BDO

Five months of positive sales came to an end in May with the latest BDO High Street Sales Tracker on Friday showing that total like-for-like discretionary sales fell by 1.2%.

In-store sales all-but-flatlined with just a 0.5% increase, failing to keep up with inflation, while online sales dropped by 3.1%, highlighting a substantial drop in volumes.

The overall monthly fall of 1.2% was in sharp contrast to a 2.3% increase this time last year with BDO saying that the decline was driven in part by that fall in non-store retail sales. This was the first negative result in e-sales since March 2024, outside of Black Friday in November last year.

All discretionary categories saw poor performances 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% from a base of a 5.6% a year ago, the latest drop being largely due to a significant downturn in fashion sales online, 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. It was also the third consecutive month of negative online homewares sales (-10.8%).

Sophie Michael, head of retail and wholesale at BDO, said it was 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.”

She added that 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”.