Shoppers were pounding the pavement and plugging in their PCs to fill their shopping carts last year, as statistics show a tentative turnaround in sales volumes despite a decline in retail sales across the final quarter.
Data released last week by the Office for National Statistics showed annual sales volumes were up 1.3% over the year, with increases in food and non-food stores, as well as non-store retailers. This was concluded with a mild lift in December, when retail sales volumes rose by 0.4% for the first time in the quarter, after falling 0.1% in November and 0.8% in October.
This was not enough to tell a tale of triumph in the Golden Quarter, the final three months of the year including Christmas, as even with people purchasing more goods overall, sales volumes were down by 1.5% compared with their pre-pandemic level in February 2020.
This was, in part, driven by a lack of total retail sales, which were down this December according to the latest High Street Sales Tracker from accountancy and business advisory firm BDO. Discretionary spend categories dropped by minus 1.4%, compared with the same month last year, in the worst monthly performance since November 2024, stats showed.
In-store sales fell by minus 0.5%, while online sales fell minus 0.6% when compared with December 2024 figures. This comes after High Street stores’ sales figures in November and October recorded below-inflation levels, BDO data showed.
However, trading updates published by key players in the UK retail scene shows a slightly happier story for the sales period, with major retailers including Aldi and Lidl recording their “best” and “biggest” Christmas ever.
CoStar News sat down with agents in the sector to get their thoughts on the period, while reviewing what recent trading updates from big-name retailers mean for their estates and wider corporate strategy this year.
Market dynamics
Overall, the sector welcomed the typical seasonal uplift but that failed to override the wider headwinds that impacted consumer behaviour throughout the year, according to Savills' Briefing Note on UK Retail Christmas Trading 2025.
The report, which was shared exclusively with CoStar News, linked the growth in sales in some areas to inflation rather than any noteworthy increases in volumes, as a result of ongoing stressors on the public's pockets. Specifically, it cites mounting food prices across December as a key factor, when food price inflation rose to 4.5% in the year to December 2025, up from 4.2% the month prior.
Operators navigated the challenges with varying degrees of success. Some recorded growth higher than inflation, as others tried to avoid spinning out. The winners were fuelled by moves to premium ranges, eclectic product mixes and ultimately, a higher spend per transaction, rather than better overall customer numbers.
Industry experts pointed to a distinction between an increase in volume versus a higher spend for better or more premium products.
“Landlord data [for example Landsec reported sales across its schemes up 6.5% for the Christmas period with footfall over the quarter up 0.7%] also reinforces a key point: when places give people a reason to visit, spend follows, but the big question remains whether we’re seeing meaningful volume growth, or simply spend being concentrated into the best propositions,” Simon Morris, managing partner, GCW tells CoStar News.
Value consciousness prevailed across the period, says Savills. Selective spending focused on food, premium own brands and small gifts but caution prevailed when it came to higher value discretionary buys, where shoppers only traded up in "emotionally significant areas", such as premium food, according to data.
Supermarket sweep
Grocers grabbed the lion's share of the festive cheer as they tried to cater to demand for fresh goods, high-end own branded foods and convenience shopping.
Of the supermarkets, the discounters recorded record numbers in footfall and increased sales, with Lidl sales up 10% from last year and an 8% increase in shoppers while Aldi rung up £1.65 billion for the period, up 3% on 2024, as customers remained conscious of cost.
In comparison, full-line grocers like Sainsbury’s noted 4.6% growth to gain market share for the sixth Christmas in a row, Savills said. Tesco recorded 3.2% like-for-like growth, taking its full year profit to one of its highest on record, with a trend towards healthier eating bolstering its fresh produce sales. It also leveraged its UK stores as depots from which to fulfil more Christmas Eve deliveries. Meanwhile, M&S was on everyone’s lips this year after recording another strong performance in the food sector of its business which was up 6.6% and achieved volume growth.
“Unsurprisingly, food is a winner, and the most notable momentum is from M&S Food – reflecting sustained investment in the estate and a shift from 'picky bits' to a more credible full-basket shop [food like-for-like +5.6% in its Christmas trading update],” Morris added.
The retailer has made headlines in recent weeks after launching a nutrient-dense range which includes salads, lunch pots, snacks and meals made in response to UK nutrient deficiency gaps, including shoppers using GLP-1 weight-loss drugs.
This comes after Greggs chief executive Roisin Currie told the BBC that treatments like Ozempic are impacting sales and leading to consumer demand for smaller portions and a healthier offering. Currie was quoting saying that the firm had "to make sure that we've got some of the snack products that customers are looking for if they are on any of the GLP-1 drugs" and that there was “no doubt” the drug was affecting its bottom line.
As a result, broader questions have been asked about the impact this had on overall food sale volumes for the grocers over the festive period, as well as what effect this is going to have on the sector in 2026.
“We're starting to see the effect of weight loss drugs, like Ozempic for example and the impact on grocery spend… and it's not just in grocery, it's also in fashion,” says Jonathan De Mello, founder and chief executive of JDM Retail. “People are buying more nutrient- dense products, more healthy products, less processed products and as a result, overall grocery spend has gone down. There are different percentages from different businesses, so it's hard to pigeonhole a number but it's down by around 7%.”
Future proofing will prove critical in curbing the impact in the near and long term for the grocers, experts told CoStar. This includes diversifying product ranges and catering to demand for easy, accessible foods and meals with high nutritional value.
“The more this takes off…the more we'll start to see a declining grocery spend in certain categories. M&S, Co-op and others are pivoting to more healthy, nutrient dense products and that's helped them, whereas other retailers haven't really done that yet and they definitely need to,” says De Mello.
He adds: “I think some of it for these kind of supermarkets is driven by significant expansion of their property empire. They are opening more stores at a higher pace than the traditional [grocers], the likes of Morrisons and Asda, which are definitely losers and continue to lose out in terms of market share to the discounters.”
Fashion focus
The relatively positive performance of the grocers was contrasted with more muted general fashion retailer results. Brands with a strong omnichannel presence performed well though, such as Next which had full-price sales up 10.6%.
Next recorded a 9.1% increase in online sales, compared with a 1.4% increase in-store, making for a strong online and physical estate strategy which helps aid online sales by providing in-store outlets for returns and collection which can be used as opportunities to upsell. The in-store experience allows customers to see the merchandise and builds product confidence through increased brand awareness, Next research shows.
Those who were not already in the ecommerce game made changes to strategy in a bid to keep up with the competition. Most notably, Irish multinational fashion retailer Primark, which has had solely bricks and mortar retail, branched out to launch a Click & Collect service. This, alongside product improvements and better value perceptions, are what helped it score a 3% increase in sales and like-for-like growth of 1.7% in the 16 weeks to 3 January 2026, the Savills report found. This was also true of ProCook which used ecommerce as a growth lever to achieve a 30% online increase in sales.
In the world of apparel and athleisure similar uneven trends were spotted. JD Sports documented a 5.3% decline in like-for-like UK sales during the three-month festive period, dragged down by a lack of December footfall and transactions, despite steady demand on Black Friday and peak trading, Savills said. The retailer stuck to its original full-year forecasts on profit, in a vote of confidence for the category even with the uncertainty.
More discretionary retailers including Sainsbury’s general merchandise and clothing saw sales decline 1% and Argos fell 2.2%. Other retailers saw a slowdown in sales growth, such as Dunelm, which had 1.6% growth due to pressures from online rivals and stronger promotional activity. This suggests a consumer environment that prioritised cost consciousness and slow purchasing of essential goods and smaller more affordable ‘treats’ over bigger non-essential buys, according to Savills research.
But the figures only tell part of the story as unlike full-year results or interim accounts, the Christmas statements are unaudited and retailers can choose the reporting period at liberty, making it difficult to accurately compare or contrast the data.
“It's the same as we've seen in recent years. You get this big mismatch between official retail sales figures and what the retailers that were at the coal face of this are saying and it's trying to make sense of those mixed messages. The big thing is it was not as bad as we were led to believe,” says Stephen Springham, partner, head of UK retail research at Knight Frank reflects.
While online strategy is key, the boom may be behind us, according to some experts who suggest that the figures have levelled.
“There's quite a lot happening in the online space but the inflection point is the fact that as a percentage of overall retail spending, it’s not growing very much any more, it’s plateauing,” reflects Springham.
“It's not this big exponential growth story that it was previously.” He adds, “It changes from one month to the next…on an annualised basis, it's hovering around the 27-28% mark at the moment. I think that's a sign of it reaching maturity rather than it being because people are flooding back to stores. There's an element of truth in that but I think it just reaches a natural equilibrium.”