Retail Sales Growth Slows in December, November Sales Revised Higher

As the holiday season approaches, retailers and investors alike are keeping a close eye on retail sales figures. The latest data from the British Retail Consortium (BRC) and KPMG's Retail Sales Monitor for December 2024 has revealed a slower-than-expected growth in retail sales, while the November sales figures have been revised higher. Let's delve into the details and explore the implications for retail stocks and the broader market in early 2024.



December Retail Sales Growth Slows

According to the BRC and KPMG's Retail Sales Monitor, retail sales growth slowed in December 2024, with total sales growth of only 1% compared to the same month in 2023. This disappointing figure reflects the challenging retail environment that has dominated the year, with consumers remaining cautious about their spending habits. Several factors contributed to this slower-than-expected growth, including consumer nervousness, potential tax rises, and the cost of putting the heating back on as the cooler weather arrived. Retailers also used promotional activity to try and win customers by offering the best price benefits, which may have led to increased competition on price and slower sales growth for individual retailers.



November Sales Revised Higher

The revised estimate of the value of total retail sales in November 2024 increased by 1.7% compared with the preceding three-month period, while the provisional estimate of the volume of total retail sales increased by 1.4%. This upward revision indicates that consumer spending was on even stronger footing heading into the fourth quarter, with solid growth of around 2.5% annualized. The robust performance in November was driven by a jump in motor vehicle and parts dealer sales (+1.6%), as well as a solid gain in food services sales (+0.7%), pointing to robust services spending in October.

Implications for Retail Stocks and the Broader Market

The trends and data provided in the materials have several implications for retail stocks and the broader market in early 2024:

1. Retail Stocks:
* Retail sales growth has slowed over the past year, with growth in retail sales slowing from 5.5% year over year (y/y) in December 2023 to 2.8% y/y in October. This suggests that retail stocks may face headwinds in the near term, as consumers remain cautious about spending.
* However, there are some bright spots, such as sport and travel equipment, clothing, and food and drink sales, which could benefit specific retail stocks.
* The upward revision of November sales data significantly improved the overall retail sales performance for the fourth quarter, indicating that consumer spending was on even stronger footing heading into the holiday season. This could benefit retail stocks, particularly those with exposure to the Chinese market, where retail sales of consumer goods went up 3% year on year in November.
2. Broader Market:
* The fragile nature of consumer confidence means shoppers will continue to be driven by price and value, moving from brand to brand to find the best price benefit. This could lead to increased competition among retailers, potentially impacting the broader market's performance.
* Elevated prices, higher interest rates, and a cooling job market are expected to result in softer household spending growth in 2025. This could have broader implications for the market, as consumer spending accounts for a significant portion of economic activity.
* Geopolitical tensions, such as those mentioned in the Global Retail Outlook 2024 report, can add further complexities to the global retail landscape and the broader market. Retailers and investors should monitor these developments closely.
* Technological innovations, such as generative AI and other technologies, can streamline operations, boost productivity, and create more captivating customer experiences. This could lead to growth opportunities for retail stocks and the broader market, as retailers invest in these technologies to improve their competitiveness.

In conclusion, the slower-than-expected retail sales growth in December, coupled with the upward revision of November sales, highlights the challenges and opportunities facing the retail sector and the broader market in early 2024. Retailers and investors must remain vigilant and adapt to the changing consumer landscape to capitalize on the potential growth opportunities that lie ahead.