What: British retail demonstrates resilience with a 1% growth in February 2025, driven by strong non-food store performance at 3.1%, while food stores experience a 2% decline amidst pricing pressures.

Why it is important: This mixed performance highlights the retail sector's adaptation to changing market conditions, where traditional channel boundaries blur as retailers balance physical store enhancement with digital growth.

The UK retail sector shows signs of continued recovery with February 2025 sales volumes increasing by 1%, following January's 1.4% growth. This performance has pushed monthly sales volumes to their highest level since July 2022, with a 0.3% rise recorded in the three months to February compared to the previous quarter. Non-food stores emerged as the strongest performers, achieving a 3.1% growth and reaching levels not seen since March 2022. Department stores grew by 2.6%, while household goods stores saw a remarkable 6.8% increase, primarily driven by hardware sales. However, food store sales declined by 2% month-on-month, following January's 4.8% rise, with rising prices cited as a contributing factor. The sector's digital transformation continues, with online spending values increasing by 3.3% in February and showing a 3.9% year-on-year growth. Industry experts note that while sales have improved, retailers face significant challenges from upcoming policy changes, including minimum wage increases and National Insurance contribution adjustments.

IADS Notes: The February 2025 UK retail sales growth aligns with broader retail transformation patterns observed throughout 2024-25. As noted in October 2024, the UK market showed early recovery signs with non-food stores rising 2.5%, setting the stage for the current growth trajectory. The channel divergence between food stores (-2%) and non-food stores (+3.1%) mirrors trends seen in February 2025 across European markets, where department stores grew 1.7% while traditional hypermarkets declined. This shift is further supported by December 2024 data showing consumers' increasing preference for experiential retail, with 68% combining shopping with dining. Despite consumer sentiment volatility in early 2025, retailers have successfully adapted through enhanced customer engagement strategies and optimized product assortments, as evidenced by the strong performance in household goods (6.8%) and department stores (2.6%). The increased demand for gold amid economic uncertainty and the 3.3% rise in online spending demonstrate retailers' effective response to evolving consumer preferences while maintaining physical store relevance.

UK retail sales rise for the second consecutive month, according to the ONS