RSM comments on ONS retail sales figures

Commenting on today's retail statistics for July 2019 released by the Office of National Statistics (ONS), Andrew Westbrook, partner and head of retail at leading audit, tax and consulting firm RSM said: 

‘Today’s figures from the ONS paint a rosier picture of overall performance, with sales increasing by 0.5 per cent when compared to the previous three months. A flat overall trading performance for the quarter as expected though. 

‘Consumer spending got a boost from a hot and sunny month and perhaps even a lift to the national mood during and following the England cricket world cup triumph over New Zealand.’

‘The standout figures for July came from department stores. The uptick in sales was marginal, yet still a surprise. Growth increased for the first time this year with month-on-month growth of 1.6 per cent, following six months of decline.

‘This begs the question – is equilibrium on the high street being restored? The number of empty and vacant units has peaked. Does this mean the remaining retailers can start to see daylight ahead? The final ‘golden quarter’ is now crucial, as retailers shift from their summer to winter stocks.

‘One area which saw a sizeable rise in July was in the weekly online spend versus the same month last year. This marked growth continues due to many retailers extending summer sales to reduce stock levels ahead of bringing in Autumn/Winter ranges. 

‘This continues the trend of non-store retail expanding in the UK retail space. Given this growth in online sales, traditional retailers without a genuine multi-channel offering are now looking increasingly at risk. 

‘Many businesses are now showing major concerns over Brexit and broader economic uncertainty. If current levels of consumer uncertainty continue, or indeed worsen, the cost of headwinds around business rates, a weak pound and no real sales taxes for on-line retail will start to cause more distress.

'Despite the positive outlook from today's ONS data, there is undoubtedly significant distress on the high street with retailers having to compete through heavy discounting to gain their fair share of the market, leading to pressure on margins and profitability. 

‘Looking ahead, we anticipate that the current political volatility will continue to have a dampening effect on consumer confidence and discretionary spending, with that consumer sentiment dipping further as we get closer to the scheduled October 31 EU exit deadline.

‘On the flipside we may see grocers take advantage of opportunities in the lead up to October 31 as consumers start to stockpile and/or panic buy.’