BDO: High Street Suffers Disappointing January Sales Growth

• In-store sales grew by +3.2% in January 2025, compared to a negative base last year
• Online sales saw significant growth, driven in part by poor January weather
• Fashion and homewares bricks and mortar sales performed particularly poorly against negative bases 

Total retail sales in discretionary spend categories grew by +7.1% in January, but concerns remain that 2025 is set to be another difficult year for retail as rising costs continue to mount, according to BDO’s latest High Street Sales Tracker.

The latest report from accountancy and business advisory firm BDO shows that the +7.1% growth comes off the back of a very weak set of results in January 2024 (-0.8%) and was largely driven by significant growth in online sales, which grew by +15.5% compared to the same period the previous year. 

Meanwhile, sales in bricks and mortar stores grew by just +3.2%, from a poor base of -4.2%, serving as a stark reminder that high street retail is struggling to recover from the trends experienced in 2024. These results indicate a large drop in volumes over the past two years. 

Fashion and homewares retailers faced particularly challenging conditions, with sales in-store growing by +3.3% and +3.4% respectively against very poor performances last year of -6.7% and -10.1%. January’s poor weather may have contributed to mixed footfall on the high street and driven a better result for online sales, but this is also a continuation of the sector’s overall poor performance in 2024 and a disappointing final Golden Quarter. 

Sophie Michael, Head of Retail and Wholesale at BDO, commented: “These results may seem positive on the surface, but the underlying numbers show that the weak growth in the run up to Christmas has continued into the new year. While many retailers may have seen a rise in sales through the release of some of the pent-up consumer spending that didn’t come through before Christmas, January trading for discretionary spend requires heavy encouragement through discounting; this delayed spending will no doubt have a significant impact on already thin margins.  

“The sector has been challenged for some time by the impact of significant cost increases, which will continue to mount throughout the year, particularly post the implementation of the changes in the budget this April. Raising the thresholds for National Insurance contributions will disproportionately affect retailers, who tend to have large workforces with lower average earnings. Add in increases to the National Living Wage, business rates and the Plastic Packaging Tax all coming together and at fast pace, their thin margins will be under even more pressure. 

“Retailers need to find a way to balance the increased cost of doing business while investing in product development, customer service and underlying technology, like AI, that will maintain their competitiveness. They need clear visibility on how their costs will increase to identify effective actions to mitigate the impact. This includes clarity over how their supply chain costs will rise, with many of the businesses they rely on being subject to some of the same pressures as themselves. The sector already saw a high number of job losses in 2024 and retail store closures; with the oncoming cost increases, these numbers are unlikely to ease in 2025.”

Source : BDO

Image : shutterstock / 130030334 / MJTH 725 x 500

For all the very latest news and intelligence on the UK's largest home improvement and garden retailers, sign up for the Insight DIY weekly newsletter.