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Xmas ‘hangs in balance’ as retail sales fall 0.6%

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UK retail sales values in October were 0.6 per cent lower on a like-for-like (LFL) basis than the same period last year, when sales had risen 0.8 per cent, according to data released today.

Results from the BRC-KPMG Retail Sales Monitor reveals that “the success of the Christmas season for retailers hangs in the balance” as sales continue to weaken.

Uncertainty over finances is affecting spend on certain items including big ticket sales, as homewares purchases remain mostly deal-driven.

Clothing & footwear sales have been hit by unseasonably warm weather, while economic unpredictability is fostering consumer caution over non-essential spending.

Helen Dickinson, Head of Retail, KPMG, pointed out that uncertainty in the European and global markets is leading consumers to remain reticent to spend as personal finances become harder to manage.

“The month overall saw ongoing challenges for big-ticket items and continued high levels of volatility across individual weeks and different sectors,” Dickinson commented.

“But one constant remains: to whatever extent sales are being made, margins and hence profits are being impacted to stimulate demand as retailers strive to cope with the new reality.

“The success of the Christmas season for retailers hangs in the balance as October’s results do not set a strong foundation.”

Non-food non-store growth, based on internet, mail-order and phone sales, picked up slightly in the month after falling back in September. Sales were 11.5 per cent higher than a year ago, more than the 10.1 per cent in September but less than in August and weaker than the 12.8 per cent rise seen in October 2010.

Stephen Robertson, Director General of the British Retail Consortium (BRC) explained that the unchanged year-to-date figure is evidence of weakness of consumer confidence.

“Underneath the headline figure, the year-to-date results show almost no growth in non-food sales,” he commented.

“Allowing for the VAT rise since last year, that suggests a substantial drop in sales volumes while the food figures indicate very little volume growth. It’s clear customers are cutting back whatever they’re buying.

“A lasting lift in consumers’ mood needs a sense that better times will come for jobs, costs and incomes. The Chancellor should use this month’s Autumn Statement to help customers and businesses by offering hope over next year’s planned fuel duty and business rates increases.”

Clive Black, Head of Research at analyst group Shore Capital, suggested that anticipation over Christmas shopping may have contributed to slow sales on the high street as consumers save their money for the festive season, pointing to IGD data that suggests that 60 per cent of shoppers will spend the same or more on Christmas than last year.

“Such an assertion, if correct, implies to our minds that November and the post Christmas January/February may also be challenging for the retailers but December, with its favourable early comparatives may actually be ‘ok’ in aggregate,” Black said.

“Beneath the waves, however, there is all sorts of activities going on and it is those retail ‘fish’ that are most healthy and flight of ‘gill’, that will survive and possibly prosper.However, as we have seen over three years now, expect further failure from the weak; others will simply eat their market share.”

Published on Tuesday 08 November by Editorial Assistant

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