Sales Revival Remains Illusory – BRC-KPMG

Kimberly Watson, Editor in Chief
March 07, 2012 /

UK retail sales values were down 0.3% on a like-for-like basis from February 2011, when sales had fallen 0.4%. On a total basis, sales were up 2.3%, against a 1.1% increase in February 2011.

Food sales picked up, helped by stocking up in the very cold weather. Non-food weakened further, despite continued promotions and discounts. For clothing, footwear and homewares, February was worse than January and December, especially for larger purchases, hit by consumer caution.

Non-food non-store (internet, mail-order and phone) sales growth slowed further after picking up sharply in December. Sales were 9.9% up on a year ago, down from 11.3% in January and 18.5% in December and also below the 10.4% in February 2011.

Stephen Robertson, Director General, British Retail Consortium, said: “The reality of weak sales shows that a convincing revival remains illusory.

“Falling inflation has eased the squeeze on household finances and halted the slide in consumer confidence but that’s at risk from fuel price rises and Budget uncertainty. Unemployment is expected to rise further causing increased nervousness about job security, which is keeping confidence fragile. Any sense of improving optimism is not yet translating into more spending.

“Total sales growth is still below inflation, so overall customers are actually buying less than a year ago, while discounts are eating into margins. Food picked up but non-food sales deteriorated with goods affected by the slow housing market among those particularly struggling.

“In this climate of continued caution, the Chancellor must use the Budget to hold back business costs, which will support jobs, growth and the much-needed consumer turnaround.”

Helen Dickinson, Head of Retail, KPMG, said: “February’s results were similar to January’s but with very different dynamics. Food performed better than in the previous month but many non-food sectors struggled. The timing of half term caused plenty of variability during February and swings in performance by individual retailers makes business planning all the more challenging.

“Consumers remain reluctant to spend unless encouraged by promotional activity. Thus, while the market is still growing slightly in headline sales terms, profitability continues to be eroded through loss of margins.

“Many retailers feel they’re fighting very hard just to stand still at best and don’t see any light at the end of the tunnel. However, there are retailers out there who deliver what the customer wants and needs – in terms of product, brand and price – which proves that if the proposition is spot on it is still possible to outperform the market and the competition.”

Food & Drink – Joanne Denney-Finch, Chief Executive, IGD, said: “These results are an improvement on January and a sign that consumer confidence is heading in the right direction. Our research shows that, although half of shoppers (47%) still believe they will be worse off in the year ahead, this is a more positive picture than last year – when 61% felt this way.
“With the exception of the snowy start to February, the winter as a whole has been milder than in recent years – which has been good for sales. Valentine’s celebrations also provided a modest boost.”

Stephen Robertson, Director General, British Retail Consortium, said: “Online continues to grow faster than any other retail channel but the rate of increase in sales has slowed since Christmas and is well down on the kind of performance that was typical in 2010 and before.

“Non-food sales have been worst affected by customers’ continuing fears about their own finances and prospects. That’s being felt online as well as in stores but the slowing of online growth may now also be reflecting some maturing of the market.”

 

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