By Daniel Hunter

Total sales in January for Scotland were 1.5% down on January 2011, when they had increased 1.9%.

This was the worst fall in total sales for any month since 1999. Like-for-like sales were 2.6% lower than a year ago, when they had fallen 0.9%. January's fall was the worst since May 2011 and the ninth decline in the past 12 months.

Food sales growth picked up after a tough December but the increase was outweighed by much weaker non-food sales. These showed the largest year-on-year fall since the survey began. Further discounting in clearance sales failed to overcome consumer caution and big-ticket homewares were especially hard hit.

As in the UK results, both like-for-like and total sales worsened in January after a better December. Consumer confidence in Scotland remained lower than the UK-wide figure. By both measures, sales fell more quickly in Scotland than elsewhere.

"A sales decline on this scale sets alarm bells ringing for Scottish retailers. Combined, as it is, with some above-inflation cost pressures, there are potentially worrying implications for Scotland's largest private-sector employer," Ian Shearer, Scottish Retail Consortium Director, said.

"The good news is food sales growth picked up after a disappointing December but non-food sales fell dramatically, despite all the discounts and promotions, which themselves hit margins.

"Customers have confronted reality again since Christmas. Consumer confidence remains low, Scottish household incomes are being squeezed by increased utility and fuel prices, and continued fears over job prospects and the wider economy are front-of-mind for many — deterring purchases which are not immediate needs. The comparison with a year ago, when there was a final burst of pre-VAT-rise spending, is also not helping this year's figures.
"The biggest year-on-year drop in overall sales in over a decade is a sign of troubled times for retail."

David McCorquodale, Head of Retail in Scotland, KPMG, said January had been a difficult month.

"January was a particularly difficult month for retailers with the significant drop of 2.6 per cent in like-for-like sales from the year before being indicative of the challenges which the retail sector will face in 2012," he said.

"When set against the backdrop of the deep discounting which many retailers undertook during the festive period in order to stimulate consumer spending it's even more concerning to see that momentum stop and for sales to suffer such a marked drop.

"Already in 2012 we have seen several big name retailers fall victim to the tough trading environment and unfortunately this trend looks set to continue as consumer confidence continues to waver in the face of economic uncertainty and widespread worries about job security.

"These figures show heavily promoted sales and discounts will help retailers stave off some of the pain but in the long term these tactics are not sustainable for businesses looking to remain profitable."

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