January 12, 2016 / 12:04 AM / 4 years ago

UK stores suffer 'disappointing' Christmas as sales growth slows

LONDON, (Reuters) - British retail spending over the crucial Christmas period recorded its weakest quarterly growth in more than a year as stores competed to offer discounts, industry data showed on Tuesday.

Shoppers are reflected in a store window as they pass sales advertisements on Oxford Street in London, Britain December 26, 2015. REUTERS/Neil Hall

The British Retail Consortium said retail spending rose by a “disappointing” 0.9 percent in the three months to December compared with a year earlier.

That was the slowest such rise in retail sales values since the three months to November 2014, and the softest calendar quarter since the third quarter of 2014.

“Despite a number of positive economic indicators, retail sales over Christmas were relatively flat with more products on discount and the depth of discounting also deeper,” David McCorquodale, head of retail at accountancy firm KPMG, which sponsors the survey.

In December alone, retail sales rose just 1.0 percent, after a 0.7 percent increase in November.

After stripping out changes in shop prices - which fell 2 percent in the 12 months to December on the BRC’s own measure - the volume of retail sales rose an annual 3.0 percent in December.

Although Britain’s economy probably ended last year as one of the fastest-growing in the developed world for a second year in a row, there are concerns that the growth is driven too much by consumer spending.

The BRC said a mix of rising consumer borrowing, a robust housing market and falling store prices should continue to support retail sales in 2016.

But it added that retailers faced rising costs from local property taxes and a higher minimum wage coming in April.

Payment card company Visa Europe on Monday published figures showing inflation-adjusted consumer spending in December was 2.3 percent higher than a year earlier, the fastest annual rate of growth since July and the second strongest since 2008.

The best performing areas were hotels, restaurants and bars, but supermarkets also did better than of late.

“The grocers had a fairly admirable Christmas with total food and drink sales back in the black for the first time since September in spite of the persistent price deflation in the sector,” said McCorquodale of the BRC survey.

Supermarket chain Sainsbury’s (SBRY.L) is expected to be the best of a bad bunch when Britain’s biggest food retailers announce Christmas trading numbers this week against the backdrop of a margin-sapping price war.

Morrisons (MRW.L) will update on Tuesday, when industry data will also be published, followed by Sainsbury’s on Wednesday and market leader Tesco (TSCO.L) on Thursday.

The BRC’s measure of retail spending on a like-for-like basis, which strips out changes in floorspace and is preferred by some equity analysts, rose 0.1 percent year-on-year in December after a 0.4 percent drop in November. Economists had forecast a 0.5 percent rise in a Reuters poll.

Official data last month showed retail sales volumes jumped by 1.7 percent in November alone, more than triple the forecast, while total retail spending in the three months to November was up by 1.6 percent on the year.

Reporting by Andy Bruce, editing by David Milliken

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