‘The ONS retail sales data for August 2019 show moderate growth at 0.6 per cent as consumer confidence continues to take a hit. This slow growth reflects the current uncertainty on the high street, in parliament and our position within the EU causing a low in consumer and business confidence.
‘Last month’s improvement in department store sales has as expected reversed to reflect the long-term distress in this segment, continuing the theme that the margins in pure bricks and mortar stores face extreme cost pressures. The one real surprise in the ONS data is that online sales have also fallen from 19.9 per cent to 19.7 per cent.
‘More broadly, following the warnings about food shortages contained in the Yellowhammer report, many food and non-food retailers increased their stock holding in the quarter to deal with the original Brexit deadline of 29 March 2019. As a consequence, we have seen increased discounting across the sector in all categories. This has ultimately led to lower margins and is illustrated by the food stores figures showing a decline of 0.2 per cent for the third consecutive month in the three-month on three-month.
‘Many retailers are now realising that extended periods of discounting damage their underlying brand. With Next announcing their results today and flagging that performance has been underpinned by more full price sales, many retailers will now be looking to improve full price sales performance going forwards.
‘Last year’s bright spots being, great weather and the world cup created an increase in consumer dwell time at home which was reflected in August 2018’s robust growth in household goods sales at 10.8 per cent. It will come as no surprise to businesses then that the category showed a strong decline in August 2019 at a negative 5.6 per cent. A somewhat sobering message.
'With Brexit uncertainty and increasing talk of a looming recession encouraging some consumers to hold back on their spending, high employment levels and a benign credit environment, combined with strong discounting, have helped to limit the impact. With consumer spending being predominantly now cashless, many businesses are planning for lower sales and profits as we move into the next 12 months.
'As we enter the all-important golden quarter when winter collections replace the summer ranges, retailers will be praying for the Brexit deadlock to break in order to release pent-up demand. But while many will be hoping for the best, they'll also need to prepare for the worst.'