Non-food suffers in sales growth slowdown

10 August 2010

UK retail sales values rose 0.5% on a like-for-like basis from July 2009, when sales had increased 1.8%. On a total basis, sales were up 2.6% against a 3.6% increase in July 2009.

Food sales growth picked up, though the growth was flattered by a smaller gain a year ago. Clothing sales growth was boosted by clearance deals but footwear was more difficult. Homewares fell back, with big-ticket items in particular hit by consumer uncertainty over job cuts and income prospects.

Non-food non-store sales (internet, mail-order and phone sales) slowed in July and were 11.3% higher than a year ago, the weakest growth for almost a year.

Stephen Robertson, Director General, British Retail Consortium, said:

"These are poor results for non-food retailing, with some sectors actually seeing sales falls. The vitality has even faded from online sales growth. By contrast food sales continue to be resilient.

“The benefit from sunny weather receded as it turned cooler and wetter in parts of the country, while the World Cup boost ended. But the overriding factor is consumer confidence – it's fallen recently, though people are still more confident than this time last year.

“Talk of public spending cuts is unsettling customers and they are concentrating on essentials.

"It's clear the recovery continues to need support. The Bank of England must resist pressure to increase interest rates too soon.”

Helen Dickinson, Head of Retail, KPMG, said:

"A small month-on-month increase in food prices is driving some of the growth seen in retail sales this month. So, once again it’s the non-food sector which is finding the environment particularly challenging. A jittery housing market and warm weather drove home-related sectors into negative like-for-like territory. On the positive side, men’s clothing had a good month. Summer sales, some of which started earlier this year, did little to entice consumers back in any decisive way as confidence has been affected by concerns over the future impact of fiscal changes – but spending at least continues to hold up and is likely to continue to do so, at least until the effects of Government measures begin to hit people’s pockets."

Food & Drink – Joanne Denney-Finch, Chief Executive, IGD, said:

“With England out of the World Cup early, grocery retailers had to work harder than expected for sales in July although performance was still up on the same period last year. The trend towards holidaying at home will have helped and drinks sales were boosted by the hot summer weather.

“Inflation in most grocery categories was limited – well behind the background rate of inflation. In the short term, this is set to continue as businesses compete for sales over the rest of summer but, further ahead, price increases in global food commodity markets are likely to be reflected in renewed inflation.”

Non-Food Non-Store* - Stephen Robertson, Director General, British Retail Consortium, said:

“Eleven per cent growth is not to be sniffed at and the comparison is with last year's second strongest month but, in the context of non-store retailing's rapid growth, it's disappointing. This is well below the average for the last twelve months and the worst sales growth since last August.

“Economic conditions are better than a year ago, but recent falls in consumer confidence reflect customers' mounting nervousness about making major spending commitments."

Commentary
Non-food non-store sales (internet, mail-order and phone sales) in July were 11.3% higher than a year ago, after gains of around 20% in May and June. July’s lower growth was against a strong 20% increase in July 2009 but, as for store sales, reflects consumer caution.

As the boost from June’s hot weather and football faded, uncertainty about job prospects and incomes took priority again. Clearance bargains attracted price-conscious shoppers but additional catalogues, special offers and promotions were often needed to attract customers, particularly for larger purchases.

Sales continued to outpace store sales but the expansion is from a very low base, as non-store sales account for only about 6% of total retail sales.

*Non-Food Non-Store sales are transactions which take place over the internet, or via mail order or phone.

Food & Drink

Food sales growth was slightly stronger than in May and June, although the growth was flattered by a smaller gain a year ago. The warm weather and World Cup continued to boost barbecue and picnic food and drink. Salads, fresh meat, fruit and vegetables all sold well, with prepared salads, dips, snacks and readymeals popular. In the cooler, wetter weather later in the month, roasting joints and hot puddings showed an uplift. Beers and wines, soft drinks and juices did well, amid widespread promotions.

Clothing

Sales picked up after showing only marginal growth in June, but the stronger growth was against a decline in July 2009 when very wet weather hit sales. The improvement was led by adults’ clothing, while growth in childrenswear remained steady and weaker than earlier in the year. Clearance events and promotions drove sales for many, but often at the expense of margins. Uncertainty about jobs and incomes made people cautious about buying, especially when they had already bought summer clothes in May and June’s hot weather. But clearance discounts did attract customers looking for good deals. Dresses, tops and skirts, lightweight knits and swimwear all sold well. Bags, jewellery and hair accessories were popular, particularly in clearance sales.

Footwear

Overall sales growth slowed further, to its weakest since last August. Both men’s and children’s fell below their year-earlier level, for the first time since August 2009. Women’s also slowed but continued to show a modest gain. Sales were often discount-driven, with heavy mark-downs in clearance events to tempt cautious shoppers. Casual shoes and sandals were also helped by the warm weather but formal styles often struggled. Where autumn/winter ranges had been introduced, some noted good early interest in new styles.

Electrical and Electronic

After the World Cup boost, TV sales slowed markedly, with larger screens suffering the most. Consumers’ uncertainty about jobs and income prospects continued to hit trade, especially for larger purchases. Sales were often for replacement purposes rather than upgrading and shoppers looked for good deals amid the many promotions and clearance deals. White goods were mixed across stores and sectors. The warm weather helped refrigeration, cooling and laundry. Smaller appliances were generally steady, with essential kitchen and cleaning products holding up best. Computers and digital imaging were mixed and often promotion-led.

Department Stores

It was a slower month for many, as clearance sales came to an end and consumer caution made big-ticket purchases more difficult. Footfall suffered on the hot sunny days but shoppers returned when the weather cooled. Clothing and footwear showed some gains but varied with the weather. Homewares were mixed, with essentials still often taking priority over discretionary and decorative items.

DIY/Gardening

Gardening sales did well in the warm sunny weather. Plants, garden care and supplies showed gains for many. After June’s heatwave and World Cup distractions, the cooler weather helped DIY and decorative ranges were popular. But uncertainty about job cuts and personal finances continued to affect plans for home improvements.

Homewares

Home accessories and house textiles fell back below their year-earlier level to show the largest decline since Spring 2009. Clearance bargains gave some gains but underlying caution and uncertainty meant many customers put off discretionary purchases and concentrated on core essentials and replacement items. Outdoor living, picnic and patio wares held up on sunny days but indoor items did not show any significant uplift on wetter days.

Furniture and Floorcoverings

After June’s clearance-driven gain, sales dropped back well below their year-earlier level. Continued consumer caution hit big-ticket items, especially major projects such as fitted kitchens and bathrooms. Beds and bedroom furniture were brighter spots for some, likewise garden furniture in the warm weather, but sales were often discount-driven.

Health and Beauty

Toiletries and cosmetics growth picked up after a poor June, helped by clearance bargains and promotions. Suncare and hayfever products had another good month, benefiting from the hot weather. Haircare showed some uplift. Core healthcare and toiletries were mixed, with strong competition between supermarkets and specialists as price-conscious shoppers sought value and good deals.

Leisure Goods

Outdoor toys and leisure held up in the sunny weather, helped by the start of school holidays. Indoor toys benefited from the launch of Toy Story 3 ranges. Books showed their first year-on-year gain since last September, on the back of Dan Brown’s “Lost Symbol” in paperback. ‘Beach reads’ sold well but non-fiction continued to lag.

UK retail sales monitor - July 2010
http://www.brc.org.uk/showDoc04.asp?id=4122&moid=7084

---

Press releases, papers and documents published on this page are the intellectual property of an organisation unrelated to Central Lobby. We promote their parliamentary and political campaigning activities as they are subscribers to the Central Lobby service.

As such, Central Lobby does not edit, endorse, or attempt to balance the opinions expressed on this page. The content of press releases and other such types of content are the responsibility of the originating organisation.