The 4 key reasons why UK Retail can feel optimistic for 2023

There’s no avoiding the huge amount of uncertainty out there right now. Questions continue to circle around when inflation will start to drop, what impact mass strikes will have on the economy and workforce, when energy prices will stabilise, and will the UK dip into a much-discussed recession? The list could go on.

But despite these lingering headwinds, there are also key indicators emerging that should give UK Retail a reason to feel optimistic about the year that lies ahead. The crucial Christmas trading period has delivered a much-needed shot in the arm for many retailers, renewing fragile confidence in both consumer demand and shopping behaviours.

Here are 4 key factors that we feel indicate 2023 is likely to be more prosperous than first feared:

?

1.?????Fashion is in

The large bellwether fashion retailers are fighting off the gloom and demonstrating a glimmer of renewed confidence, after experiencing a stronger peak Christmas trading period than many anticipated.

Take JD Sports and Next as key examples – at the start of the month JD Sports upgraded its profit outlook after revenue grew by more than 20% for the six-weeks to 31 December, while Next has also raised its pre-tax profit forecast for the current year after full-price sales rose 4.8% in the nine weeks to 30 December, when compared with the same period the previous year.

Lifestyle and fashion brand Fat Face also revealed an impressive 34% rise in sales for the Christmas period, compared to the previous year.

With fashion retailers dispelling fears of a Christmas ravaged by the cost-of-living crisis, these positive figures mean many will have more in the bank than expected to help them weather the rest of the year ahead.

?

2.?????Grocers made a feast of the festivities

Fashion wasn’t the only sector to have enjoyed a strong Christmas, as Brits also didn’t hold back when it came to stocking their Christmas fridges!

Lidl reported that sales increased by almost 25% over the four weeks to 25 December, compared with the same period the previous year, revealing that 23 December 2022 was its busiest-ever day of trading in 28 years. Fellow value operator Aldi also posted record Christmas sales, up 26% compared to Christmas 2021, and with sales topping ￡1.4bn in December for the first time.

Big four grocers Tesco and Sainsbury’s also enjoyed the sales uptick, with Tesco UK’s sales growing 7.2% during the period and those at Sainsbury’s rising by 7.1%. Meanwhile, at the higher end of the grocery market, M&S also enjoyed a sales rise of 6.3% compared with the previous year.

With the grocers a strong force on the store expansion trail, these figures are likely to bolster their efforts to secure new space this year.

?

3.?????Shoppers are returning to the high street

With recurrent Royal Mail strikes to contend with, many shoppers have been rediscovering their local high streets and shopping centres. The British Retail Consortium has reported that footfall during 2022 was at its highest level since the pandemic began, just 11.8% below pre-pandemic levels. This reflects a significant improvement on 2021 footfall when footfall was 33.2% below pre-pandemic levels. For the key December trading period, footfall was down just 7.3% on pre-pandemic levels.

Retailers themselves also heralded the return of shoppers to bricks-and-mortar stores, with Fat Face reporting that 47% of its customers returned to stores, which enabled the retailer to have its best trading day to date for its Boxing Day sale. Premium fashion brand Reiss also revealed that in-store sales rose by 18.5% for the nine weeks to 7 January, while Primark – which remains a predominantly store-led retailer – reported sales were up 15% for the 16 weeks to 7 January, compared with the previous year.

Chocolatier Hotel Chocolat announced earlier this month that following a bumper Christmas period with in-store shoppers – its best since the company was founded nearly 20 years ago – it now plans to open 50 new shops across the UK to capitalise on this swing back to bricks-and-mortar shopping.

With sales figures confirming the continued crucial role of unique and engaging in-store experiences, retail brands are likely to keep store investment programmes on the agenda for this year. Other retailers expected to be on the expansion trail include Monsoon, Mango and Dune.

?

4.?????Is the online retail bubble about to burst?

The marked trend for online sales growth has continued unabated for the past decade, often at the expense of in-store sales. But could this now have peaked, with the tide about to turn back in favour of physical stores?

Figures from the IMRG Online Retail Index – which tracks the online sale of 200 key retailers – found that UK online retail sales fell by a record 10.5% last year, with December sales down 12%. This marks the first year of full-year decline in online sales, with Black Friday online sales also flat. The only categories to continue showing growth were lingerie (0.9%), haircare (9.1%) and makeup (8.3%).

With online sales coming back into check, many retailers will be spending 2023 reassessing their store portfolios to ensure they are trading from the right space in the right locations. This means a number will potentially also look to infill with new opportunities where needed to ensure they can meet changing consumer demands.

?

So, whilst an air of uncertainty persists, the combination of these four key indicators, we believe, should offer hope to the UK retail property industry.

“It is still fairly early days,” says MMX Retail partner Nick Symons, “but it has been great to hear the positive news stories coming out of the Christmas period. This, paired with early signs that some of the concerns surrounding the wider economy and factors that impact retail might not be as severe as initially feared, is going to make for an exciting year ahead.”

?

To discuss your plans for retail and leisure space this year, get in touch with the MMX Retail team today! https://mmxretail.co.uk/services/