Consumer spend left languishing despite summer sun
Published: 6 August 2019 - Fiona Garcia
July records lowest retail sales growth on record, as consumers “remain disengaged” in the face of Brexit uncertainty and slow wage growth, with both physical and online non-food stores struggling.
Sales increased by just 0.3% in July, against an increase of 1.6% for the same month last year, when the World Cup and sunshine gave figures a boost. This year has been weak by comparison, said the British Retail Consortium (BRC) and the slow growth in July follows the worst June since the BRC’s records began in 1995.
Whilst non-food retail sales in the UK were in growth year on year last month, over the three-months to July, figures dipped by 2% on a like-for-like basis and 2.1% on a total basis. This is below the 12-month total average decrease of 0.6%.
Both physical stores and online retailers struggled during the period, with in-store sales of non-food items down 4.1% on a total basis and 4% on a like-for-like basis over the three months to July; a figure that is worse than the 12-month total average decline of 2.6%.
Despite the non-food online penetration rate increasing from 28.4% in July 2018 to 29.8% last month, online sales of non-food products grew 3.7% in July, against a growth of 7.5% the previous year. The three-month and 12-month average growths were 3.1% and 4.7% respectively.
BRC chief executive Helen Dickinson OBE said: “While retailers will welcome the return to growth, it has nonetheless been a punishing few months for the industry. The combination of slow real wage growth and Brexit uncertainty has left consumer spending languishing with the 12-month average total sales falling to a new low of just 0.5%. Whereas last year’s glorious sunshine and World Cup Finals led to strong consumer demand over the summer, this year has been weak in comparison, with both June and July showing the lowest sales on record for their respective months. And it is not just high streets that are suffering, with non-food online growth also one percentage point below the 12-month average.”
However, not all retailers have seen a slump and the heatwave proved a real boost for some. Homebase reported that sales on July 24 this year beat its best single day of trading last year, with the retailer raking in £690,000 compared with its best single day in 2018, when £645,000 went through the tills.
The home improvement retailer recorded £1.5million in just three days of trading last month, with sales of air con and evaporative coolers accounting for more than half of that amount, and the rest in sales of fans.
“To put that into context,” a spokesperson for the company told DIY Week, “our best week so far this season saw us make £742,000 over seven days of trading! Our week-to-date sales are up 264% vs the same period last year.”
Meanwhile, the BRC-KPMG Retail Sales Index found that UK retail sales increased by 0.1% on a like-for-like basis from July 2018, when they had increased 0.5% from the preceding year. This is above the three-month and 12-month averages of -1.5% and -0.2% respectively.
KPMG UK head of retail Paul Martin said: “The UK may have had record temperatures in July, but retail sales were far from record-breaking at just 0.3% growth. While any growth is welcome after two months of decline, it’s clear that most players need more than sunshine to get back on their feet.”
He continued: “Online non-food sales overall actually grew by only 3.7%, which is considerably lower than previous years. Meanwhile, another category which has historically benefitted from the good weather is grocery, but even here sales are lacklustre, which is a cause for concern.
“With consumer confidence holding up in the face of prolonged Brexit uncertainly, shoppers are notably disengaged overall. The pressure continues to build between online and physical offerings, costs continues to rise and the demands of consumers continue to grow. The key question is, who can handle the heat?”
Ms Dickinson believes the Government could do more to support retailers at this tough time. She concluded: “The challenging retail environment is taking its toll on many high street brands who must contend with rising import costs, a multitude of public policy costs, and ever higher business rates. A coherent strategy for retail is needed. The Government should freeze future business rates rises and fix the appeals system before embarking on a wholesale reform of this broken tax system.”