Retail in the doldrums too

Retail sales followed the services sector by slowing in August, with people unwilling to splash out on big-ticket items. Oh for a shot of confidence...

by Dave Waller
Last Updated: 06 Nov 2012
Total retail sales increased by 1.5% last month, according to the latest survey by the British Retail Consortium (BRC). Well, at least it’s still in increasing, you may think – but note that it follows a 2.5% rise in July and compares unfavourably with the 2.8% rise of August last year. Worse, on a like-for-like basis, stripping out the impact of additional shop floor space, overall retail sales fell 0.6% - compared with a 0.6% rise in July and a 1% rise last August. Economists had expected like-for-like sales to be flat.

And you know what happens when you’re up against it: it’s time to pull out the football managerisms. At least if you’re Stephen Robertson, director general of the BRC, who described the current retail sector as a ‘tale of two halves’: food sales proved more resilient than non-food sales, particularly footware and homewares. Discounting is now rife in big-ticket items and retailers’ margins are down.

Robertson stopped short of describing himself as ‘sick as a parrot’, but it would’ve been fitting. Added to the usual culprits of high inflation and the ongoing squeeze on personal finances there’s the increasingly worrying issue of confidence: among both business and the average punter, the willingness to go out and spend money is looking incredibly tenuous. And is that any surprise? After delivering grim figures on the manufacturing and construction sectors, Markit yesterday revealed that the service sector, responsible for 70% of GDP, was slowing too. And now as the retail piece takes its place in the jigsaw, the completed picture is one of a very grim-looking third quarter.

We’ve already had profit warnings from HMV, Carpetright and Topps Tiles, while Habitat, TJ Hughes and Focus have all gone into administration. Now fashion maker Alexon, which owns Ann Harvey, Kalico and Eastex, is looking for a buyer. Sales there were down 9% in the first three weeks of August compared with the previous year. Sad to say, but we can probably expect a lot more of these stories as we head towards Christmas. Do we not like that.

That said, there were a couple of curve-balls here. Whitbread’s sales were up, thanks largely to the popularity of the Costa Coffee chain (sales up 28.8%, pushing group sales up 12.9%). Seems that no matter how bad things are in the economy people are still happy to splash out on sloppy coffee. Even more bizarrely, new car sales were actually up in August. Seems unlikely, but maybe everyone’s saving money on sofas and clothes to buy motors instead?
Economy Retail

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