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High street pressure mounts as retail sales plummet


Inflationary pressures and widespread consumer uncertainty last month contributed to the worst year-on-year drop in retail sales since at least 1995, according to the British Retail Consortium (BRC) and KPMG’s March Retail Sales Monitor.

The trading index shows that food and non-food sales dropped significantly, with big ticket and furniture sectors suffering the most, contributing to an overall like-for-like (LFL) sales fall of 3.5 per cent and a total sales decline of 1.9 per cent.

Even non-food/non-store sales - which include online trading - slowed, growing by just 7.5 per cent year-on-year - the smallest increase recorded since the BRC and KPMG started monitoring this area of the industry in October 2008.

A report compiled by Investec Securities retail analysts David Jeary and Katharine Wynne today acknowledged that the Easter calendar shift, which meant Good Friday and Easter Saturday was in March last year, has inevitably had an impact on the high street’s LFL performance, although they noted that longer-term trends are still concerning.

They highlighted that the retail sales data represents the worst one-month and three-month performance since December 2008, when the UK was coming to terms with the collapse of Lehman Brothers and the far-reaching negative consequences this had on the national economy.

Jeary and Wynne said that the three-month weighted average has moved to negative in both food and non-food, to -0.3 and -1.1 per cent (inc-VAT) respectively.

Stephen Robertson, Director General of the BRC, commented: “This is the worst drop in total sales since we first collected these figures in 1995.

“Non-food retailers were particularly hard-hit. This is strong evidence of the pressure customers and traders are under. This year’s later Easter is a factor but this fall goes way beyond anything that can be explained by that alone.”

He drew attention to “uncomfortably high inflation and low wage growth”, which have contributed to an unusual year-on-year fall in disposable incomes, and highlighted rising fuel and utility costs as factors that are forming a barrier to consumer spending.

“Falling house prices, higher VAT and the prospect of more tax rises and job losses left people unwilling to spend unless they really had to,” he added.

Already this year the Centre for Retail Research has warned that around 10,000 shops will close in the UK as retailers reduce the size of their store portfolios in light of growing economic pressures.

Companies from all sectors are set to be affected, and some have already started putting reduction plans into action.

HMV Group, which owns music and DVD specialist HMV and bookseller Waterstone’s, is closing 60 outlets in 2011, and sporting goods provider JJB Sports is reducing its UK network of stores by 43 during the course of the year, while other businesses are expected to follow suit.

Helen Dickinson, Head of Retail at KPMG, said: “Many retailers will not be able to sustain this ongoing weakness in demand beyond the short term and are hoping for some good news around the extended bank holiday period and a feel-good factor driven by the royal wedding.

“However, as disposable income continues to fall, without reducing saving or increasing borrowing - which would oppose current trends – this will not be possible.”

Published on Tuesday 12 April by Editorial Assistant

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