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Worst fears of negative growth in retail sales come true

11
Nov '08

UK retail sales values fell 2.2% on a like-for-like basis, from October 2007, when they had risen 1.0%. Total sales were lower than a year ago for the first time since April 2005.

As in previous months, food and drink was the only sector to show sales significantly up on a year ago. Clothing and footwear remained poor and often discount-driven, despite colder and much wetter weather than last October. Furniture and homewares fell further below year-earlier levels, despite further discounts and promotions.

Discounts and promotions continued but often failed to tempt customers unless they perceived value or the purchases filled a need. Non-food non-store sales in October were 16.6% higher than year ago. Online sales fell on the days after the banking crisis hit, as consumers were anxious about their financial outlook.

Stephen Robertson, Director General, British Retail Consortium, said, "These are seriously poor numbers, especially in the run-up to Christmas. For the first time in three years total retail sales fell into negative territory - further evidence of how difficult trading conditions are for retailers.

Like-for-like sales have now fallen in seven of the last eight months with every sector down on a year ago apart from food and footwear. Shoe sales were driven by extensive discounts. "The negative sales figures reflect record low consumer confidence. These are tough times for families and retailers, who are hoping the Bank of England's bold interest rate cuts will provide a much-needed boost."

Helen Dickinson, Head of Retail, KPMG, said, "A fall in the value of total sales is extremely rare - the last time it occurred, in April 2005, was due the timing of Easter. With shop price inflation rising at about 3%, the extent to which consumers have reduced the volume of purchases becomes apparent.

This is hardly surprising given the uncertainty created by the turmoil in the financial markets and its knock-on implications. It is unlikely that the much needed 1.5% rate cut will influence Christmas spending patterns - historically it takes a number of months for rate cuts to feed through into spending.

Retailers can only hope that the October performance is not representative of consumers' spending intentions for the next 6 weeks. However, there is no doubt retailers will need to resort to heavy discounting to bolster sales over this
crucial trading period."

Food & Drink - Joanne Denney-Finch, Chief Executive, IGD, said, "As the economic downturn bites and food inflation begins to wane, the pace of growth in food and grocery sales slowed slightly during October. The seasonal boost of Halloween and the first signs of Christmas promotions kept the momentum going during the latter part of the month."

"Retailers have been adjusting to a new economic reality by focusing on value, while IGD research shows consumers have been adapting by putting more effort into their grocery shopping - seeking out promotions, cooking from scratch, and searching out the best deals. With the surge in interest in the provenance and ethics of food which has occurred since the last major downturn, it seems that shoppers are scrutinising value, but they are not compromising their values."

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