The most recent retail sales figures from the Office for National Statistics make for illuminating if not uplifting reading. Sales in February were over 1% higher than January in volume terms suggesting consumers were feeling positive. Moreover, that gain took sales volumes back to where they were in February 2020 before the pandemic.

Total non-food sales – that is department stores, clothing, household and other non-food items – increased by 2.4% between January and February driven by a 5.5% rise in department stores and a 2.9% rise in clothing.

Unfortunately, when compared with February last year on a seasonally-adjusted basis – which we would argue is a more accurate reflection – sales by volume were actually down 3.3% despite the boost from department stores.

In value terms, spending was up 6.3% on a seasonally adjusted basis but this was entirely due to rising prices in most categories.

In food, volume sales were down 2.3% as consumers tightened their belts but in value terms sales were up more than 11% as prices rose by 18% last month, the highest level on record.

Sales of household goods in volume terms dropped 8.7% in February compared with annual declines of 8.4% and 11.8% in January and December as shoppers eschewed non-essential spending.

According to the GfK consumer confidence survey, while overall confidence may have improved slightly in February after several months of record low readings, the major purchase index – which reveals consumers’ willingness to spend on big-ticket items like sofas, washing machines or cars – is almost at rock bottom.

There is some light in the gloom, though, as spending on clothing and footwear rose last month in volume terms as well as value terms.

‘Despite the ongoing cost of living squeeze, customers were ready to spend on what they needed, with higher sales for categories including clothing and cosmetics,’ observed Helen Dickinson, chief executive of the British Retail Consortium.

The end of the Energy Bill Support Scheme in April means there remain challenges to consumer spending in the coming months, according to Dickinson, but it seems shoppers consider clothing and footwear to be ‘essentials’.

That could bode well for earnings from stalwarts such as Next (NXT), Marks & Spencer (MKS) and Shoe Zone (SHOE:AIM), who still have a strong high-street presence, while online retailers may fare less well as the post-pandemic surge in e-commerce seems to be rolling back as consumers return to shopping in person.

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