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Shoppers swapped party outfits for comfy clothes in the Christmas sales as the Omicron Covid variant saw festive parties cancelled and the return of working from home guidance.
Helen Dickinson, boss of the British Retail Consortium (BRC), said loungewear was "back in fashion".
But despite rising cases and concerns over a possible lockdown, UK retailers posted strong sales in December.
Clothes and jewellery dominated Christmas gift buying at the tills.
Total sales rose 2.1% in December compared with the same period a year earlier, according to statistics from the BRC-KPMG retail sales monitor. They were up by nearly 5% over a two-year period before the pandemic.
Over the three months to December, total food sales increased 0.4%, while non-food retail sales rose 4.8%.
Ms Dickinson, chief executive of the BRC, said despite the concerns over Omicron, "retail sales held up through December".
"Loungewear was back in fashion, as many pre-empted the possibility of future restrictions," she added. "Meanwhile, the return of work-from-home advice and reduction in Christmas social events, caused formalwear sales to slow."
Compared to December 2020, when the UK was subject to Covid restrictions during parts of the month, online sales fell 13.9% last month, as shoppers returned to High Street stores.
Paul Martin, UK head of retail at KPMG, said footwear was the only online category to see mild growth.
But for the year as a whole, online sales grew by 14.3% overall on 2020.
Despite the positive sales figures in December, Ms Dickinson said businesses faced "significant head winds in 2022, as consumer spending is held back by rising inflation, increasing energy bills, and April's National Insurance hike".
"It will take continued agility and resilience if they are to battle the storm ahead, while also tackling issues from labour shortages to rising transport and logistics costs," she added.
With UK inflation at a 10-year high in November, and the rate expected to increase further in the next few months, many analysts are warning of a cost-of-living "crisis".
Businesses are also bracing for higher energy costs due to surging wholesale gas prices.
Figures from Barclaycard showed a jump in essential spending for December but flagged that the spread of Omicron weighed heavily on hospitality and leisure spending.
The credit card spending data revealed total spending rose 12.2% in December, lifted by a 13.7% rise in essential spending, which was driven by supermarket shopping and fuel.
Restaurants saw spending slide by 14.1% against pre-pandemic levels from 2019.
Jose Carvalho, head of consumer products at Barclaycard, said more Brits "were either isolating or choosing to stay at home due to the new variant, which hampered face-to-face retailers as well as hospitality and leisure outlets".
Retailers are starting to issue their Christmas trading updates, with discount chains among the strong gainers.
On Tuesday, the UK arm of Germany's Lidl said that in the four weeks to 26 December its sales rose 2.6% from a year earlier as it benefited from shoppers switching from other supermarkets.
Lidl said its Christmas jumpers were the fastest selling non-food and drink product, with one sold every two seconds on first day of sale.
Christian Härtnagel, Lidl GB chief executive, said the pandemic had been challenging, but added: "As inflation continues to rise, I want to reassure each and every one of our customers that we remain resolute in our promise of being the destination for the lowest grocery prices in the market."
That came a day after Aldi said its Christmas performance was boosted by record sales of its premium range food and strong demand for beer, wine and spirits.
Last week, discount chain B&M raised its profits expectations after reporting a strong festive trading period.
Major supermarkets report trading updates this week, with Marks & Spencer and Tesco tipped by analysts to have done particularly well.
