// Retail Health Index figures for Q3 is a record-low score of 75
// This meets predictions made in Q2 & is lower than the historic low previously recorded in 2012
// UK retail health in the final quarter predicted to decline even further to 74
The health of the UK retail industry has dropped to record lows as high street businesses endured a “desperate” quarter, according to leading industry experts.
The Retail Think Tank, comprising analysts from KPMG and Ipsos, said that as it had predicted in the previous quarter, retail health in the third quarter of 2019 surpassed the historic low previously recorded in the final quarter of 2012.
The latest Retail Health Index (RHI) figures sees the third quarter score a record low of 75, with health in the final quarter predicted to decline even further to 74.
The think tank was unanimous agreement that the industry has faced a prolonged decline of health, due “unprecedented” rate of store closures, business failures, job losses and “overall turmoil”.
READ MORE:
- UK retail health expected to sink to record lows
- 2870 stores shut down in first half of 2019
- High streets face bleak future without strategy rethink: study
The RHI hasn’t moved in a positive direction since the final quarter of 2015, with the think tank attributing this to legacy players struggling with the rapid rate of change in the industry.
In the think tank’s assessment of demand, retailer margins and retail costs, it concluded that the industry had struggled with all three of these aspects in recent months, resulting in the 14th consecutive quarter of either downward or static movement of the RHI.
Looking ahead to the all-important final quarter of the year – when many retailers often record their strongest performance due to the peak Christmas season – the think tank was in agreement that much depended on the outcome of Brexit negotiations.
The think tank believes demand in the final months of 2019 would flat-line at best, while margin and cost would continue on a negative trajectory, therefore pulling down RHI forecast to a new low of 74.
Retail Think Tank co-chair Dr Tim Denison said the third quarter was a “desperate” time for many retailers.
“Such consistent retraction in growth and lacklustre sales across consecutive months is quite unusual and paints a bleak picture of ill-health plaguing a large proportion of the industry,” he said.
“Even online sales were markedly down and many retailers – once celebrated for bucking the downward trend – found themselves in hot water.”
He added: “Food got off to a rocky start in August, but promotional activity and the consumer’s need to find affordable indulgences elsewhere seemingly worked in grocery’s favour.
“For non-food retail categories though, there was little deviation away from growing evidence to suggest that consumers are less and less interested in buying new products.
“Fashion really struggled to win over consumers, with new collections often discounted from launch to get stock moving.
“This approach is clearly detrimental to retailer margins, and against a backdrop over ever-increasing costs, many players will now be desperate to make up for lost ground in the final months of the year.”
KPMG head of retail Paul Martin it was hard for consumers and retailers to feel upbeat about the coming months, as political and economic uncertainly continues to delay or disrupt purchasing and business decisions.
“With the final ‘golden’ quarter an obvious focal point for many retailers, the period marks a make-or-break point – especially for those that have struggled to achieve meaningful sales growth so far this year,” he said.
“To a degree, British consumers have appeared defiant in the face of economic and political turmoil, choosing to keep calm and carry on.
“The run-up to Christmas is arguably a time when consumers will take this approach most prominently, but retailers still have their work cut out to maintain demand, so it will likely flat-line at best.
“There will be those that can buck this trend of course, but that success will pivot on an ability to turn these adverse trading conditions into an advantage.
“That’s something legacy players continue to struggle with currently.”
Click here to sign up to Retail Gazette’s free daily email newsletter
