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UK retail sales volumes fell back in December, according to the Office of National Statistics, as consumers cut back on spending because of inflation.

The ONS said retail sales volumes are estimated to have fallen by 1% in December 2022, following a fall of 0.5% in November (revised from a fall of 0.4%).

Sales volumes are now 1.7% below their pre-coronavirus levels.

Food store sales volumes fell by 0.3% in December 2022 from a rise of 1.0% in November. Feedback from some retailers suggested that the November increase was because of customers stocking up early for Christmas.

Food sales volumes have followed a downward trend since the lifting of restrictions on hospitality in summer 2021.

While sales values continue to increase, supermarkets have reported that they are seeing a decline in volumes sold because of the increased cost of living and food prices.

Non-food stores sales volumes fell by 2.1% over the month, with, according to the ONS “continued feedback from retailers and other wider evidence that consumers are cutting back on spending because of increased prices and affordability concerns”.

Within non-food stores, the sub-sector of other non-food stores reported a monthly fall in sales volumes of 6.2% because of strong falls in cosmetics stores, sports equipment, games and toys stores and watches and jewellery stores.

Department stores sales volumes fell by 3.1%, clothing stores sales volumes rose by 1%, while household goods stores (such as furniture stores) increased by 1.5% over the month.

The proportion of online sales fell to 25.4% in December 2022 from 25.9% in November, with anecdotal evidence that Royal Mail strikes led to consumers shopping in stores more.

Between 2021 and 2022, retail sales volumes fell by 3%, as the lifting of restrictions on hospitality led to a return to eating out, and rising prices and the cost of living affected sales volumes.

Morning update

Sausage skin manufacturer Devro “traded well” last year and expects to post earnings above current expectations, it announced this morning in a full year trading update.

The group reported revenue of circa £290m reflecting growth of around 15% (11% at constant currency) in 2022 compared to 2021.

Constant currency revenue growth was driven by higher pricing, reflecting successful recovery of cost inflation, as well as good volume increases particularly in our mature markets.

The second half of the year delivered strong operating margins, reflecting the benefits of management’s pricing actions, operating efficiency and foreign exchange tailwinds.

As a result, adjusted operating profit is anticipated to be ahead of the board’s expectations, subject to any audit adjustments.

Elsewhere, Procter & Gamble has raised its full year sales guidance on “solid” second quarter sales numbers.

The consumer giant yesterday reported second quarter net sales of $20.8 billion, a decrease of one percent versus the prior year.

However, excluding the impacts of foreign exchange and acquisitions and divestitures, organic sales increased five percent.

This organic sales increase was driven by a ten percent increase from higher pricing and a one percent increase from positive product mix, partially offset by a six percent decrease in shipment volumes.

In light of the organic growth, P&G raised its guidance for fiscal 2023 all-in sales to a range of down one percent to in-line versus the prior fiscal year from a prior range of down three percent to down one percent.

The company also raised its outlook for organic sales growth to a range of four to five percent from a prior growth range of three to five percent.

P&G maintained its outlook for diluted net earnings per share growth – in the range of in-line to up four percent – despite raising growth expectations.

The company said that, given continued significant cost headwinds from commodity and materials costs and foreign exchange impacts, it continues to expect EPS results to be towards the lower end of the fiscal year guidance range.

CEO Jon Moeller commented: “We delivered solid results in the second quarter of fiscal year 2023 in what continues to be a very difficult cost and operating environment.”

“Progress against our plan fiscal year to date enables us to raise our sales growth outlook for fiscal 2023 and maintain our guidance range for EPS growth despite significant headwinds. We remain committed to our integrated strategies of a focused product portfolio, superiority, productivity, constructive disruption and an agile and accountable organization structure.

“These strategies have enabled us to build and sustain strong momentum. They remain the right strategies to navigate through the near-term challenges we’re facing and continue to deliver balanced growth and value creation.”

On the markets this morning, the FTSE 100 is back up 0.4% to 7,774.6pts after yesterday’s falls.

Risers include Hotel Chocolat, up another 6.5% to 222p, Naked Wines, up 5.9% to 129.6p and Nichols, up 5.8% to 1,095p.

Fallers include PZ Cussons, down 0.9% to 211p, AG Barr, down 0.9% to 526.4p and Diageo, down 0.8% to 3,661.5p.

Yesterday in the City

The FTSE 100 closed yesterday back down 1.1% to 7,747.2pts as 2023 global economic optimism took a hit.

Tech-focussed stocks were in the firing line, with THG losing 7.6% back to 49.5p, Ocado down 7.1% to 707.8p and Just Eat Takeaway.com, down 5.2% to 2,100.5p.

Other fallers included Bakkavor, down 3.7% to 105p after issuing a full year trading update, Pets at Home, down 2.9% to 325p, McBride, down 2.9% to 25.5p, Naked Wines, down 2.7% to 122.4p and Kerry Group, down 2.5% to €88.09.

The day’s risers included Hotel Chocolat, which jumped 12.4% to 208.5p after releasing strong Christmas trading numbers, PayPoint, up 5.2% to 530p, FeverTree, up 3.5% to 1,078p, British American Tobacco, up 1.2% to 3,108p, Imperial Brands, up 1.2% to 2,051p and Virgin Wines, up 0.9% to 55.5p.

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