Significant post-Christmas discounting boosted January retail sales, but overall retail growth remained weak and continued to lag behind inflation, according to the latest High Street Sales Tracker from BDO. Inflation rose to 3.4% in December, fuelled in part by a 4.5% rise in food prices.
BDO’s data shows that total like-for-like sales across stores and online increased by only 1.7% last month compared to January 2025. This marks the ninth time in 12 months that sales growth has fallen short of inflation, indicating continued declines in sales volumes.
While high street stores grew 4.7% in January, this was largely due to significant promotions as retailers cleared excess stock after a disappointing December that saw in-store sales falling 0.5%. Meanwhile, online sales enjoyed a more successful Christmas, up 4.1% YoY according to data from Adobe Digital Insights, but BDO reports that they grew by just 0.7% in January.
Fashion led discretionary categories, with in-store sales up 7.6% and non-store sales rising 4.8% year on year. However, total discretionary spending, including fashion, homewares, and lifestyle, remained subdued, growing only 1.7%.
The expert view – “cautious optimism” is overstated
Sophie Michael, head of retail and wholesale at BDO, warned that January’s headline figures mask the ongoing fragility of the market. “On the surface these results might look like cause for cautious optimism,” she said. “But looking closer, it’s clear that after a very disappointing Christmas, the trading environment for retailers has hardly improved in the new year.”
Michael noted that sales growth early in the month was “almost entirely driven” by deep discounting as retailers sought to free up space and generate essential cashflow – activity that risks further eroding already thin margins.
She added that uncertainty around economic conditions, rising unemployment and declining disposable income means retailers face a challenging road ahead.
“Encouraging consumers to engage in discretionary spending will require substantial effort and strategic initiatives,” she concluded. “Retailers must navigate these turbulent times with innovative approaches to stimulate consumer confidence and spending, while at the same time remaining nimble and agile enough to adapt to changing behaviours and further economic headwinds.”
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