Worst retail sales growth for six months

6 December 2011

NOVEMBER % change on year ago			SEPTEMBER – NOVEMBER: 3-MONTH WEIGHTED AVERAGE % change on year ago
Like-for-Like	Total		Like-for-Like			Total
All Categories			Food	Non-Food	All Categories	Food	Non-Food	All Categories
-1.6%	0.7%		1.5%	-2.1%	-0.6%	4.6%	-0.5%	1.7%

· UK retail sales values were 1.6% lower on a like-for-like basis from November 2010, when sales had risen 0.7%. On a total basis, sales were up only 0.7%, against a 2.8% increase in November 2010. On both measures, sales performance was the weakest since May.

· Food sales growth was little changed from October's 5-month low. Non-food sales fell further below their year-earlier level, with sales largely promotion-led. Clothing and footwear sales were hit by the mild weather, as well as by underlying uncertainty about jobs and incomes. Consumer caution continued to hit big-ticket homewares and furniture purchases most.

· Non-food non-store (internet, mail-order and phone) sales growth fell back in November after picking up in October. Sales were 8.6% up on a year ago, the weakest since March and half the previous November's increase.

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

“There's a worrying lack of cheer in these figures. The weakest increase in sales for six months suggests consumers are keeping a tight rein on their spending, despite Christmas being so near.

“This November's mild weather contrasted with much lower temperatures last year, hitting sales of winter clothing and footwear particularly hard. Consumers are not quite in the Christmas mindset yet, although stores are working to generate much-needed sales with high levels of festive discounting. Retailers hope that customers who've managed their finances carefully in recent months will still treat themselves and their families in December, unhampered by the severe weather which disrupted shopping twelve months ago.

“The Autumn Statement's bleak assessment of the UK recovery is the latest in a sequence of poor economic news which includes falling sales, rising unemployment and stubbornly high inflation. The Chancellor offered some modest assistance but, this close to Christmas, more concrete progress on measures to inspire confidence in consumers and businesses is badly needed."

Helen Dickinson, Head of Retail, KPMG, said:

“The latest figures prove once more that the health of UK retailing is deteriorating. Christmas is a crucial trading period for the UK retail sector but this year many retailers will be nervous and unsure as to how the season will pan out. Cash-strapped consumers continue to be reticent and last week's gloomy economic forecast by the Chancellor won't help to boost confidence levels.

“Any sales are hard won, with high discount and promotion levels. Retailers' performance is suffering because of weak top-line growth and declining margins, making the backdrop even more challenging. December will require some tough decisions for a number of retailers as they struggle to plot a path in such challenging conditions.”

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

“Households are feeling the squeeze on their incomes from pressures such as rising utility bills. The uncertain economic climate is clearly impacting on shopper sentiment: 52 per cent of them now expect to be worse off, nearly double the level seen in August 2010 (27 per cent).

“Despite the extraordinary economic climate, our research also shows eight out of ten people are still prepared to pay extra for premium food and groceries. Shoppers have indicated they may indulge themselves during the festive period: 71 per cent say they will spend more or at least the same on their Christmas meal, compared with last year.”

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

“The growth in non-food non-store sales looks impressive next to the sector's overall performance but in fact this is its weakest result since Easter and business is growing at half the rate it was this time last year.

“Poor consumer confidence and squeezed disposable incomes are affecting all retail channels. Internet retailers are offering high-profile discounts and holding special one-day events ahead of Christmas in much the same way as high street traders, hoping to generate an uplift in spending. For the longer term, if online retailers are to reach their full potential, the UK Government must increase pressure on the European Commission to bring down barriers to trade and deliver its promised single digital market.”

Commentary

Non-food non-store (internet, mail-order and phone) sales growth fell back in November after picking up in October. Sales were 8.6% up on a year ago, the weakest since March and half November 2010's 17.6% increase. Year-on year-increases in 2011 so far have all been below 14%, compared with an average of over 16% in 2010.

It was another difficult and disappointing month, with sales led by widespread promotions and discounts. Free delivery, special sales events and one-day deals helped some but often at the expense of margins. Clothing and footwear sales suffered in the unseasonably mild weather. Persistent uncertainty about jobs and incomes made consumers shop carefully, especially for big-ticket home and furniture purchases.
Sales continued to outpace store sales but the expansion is from a low base, as non-store sales account for only about 8% of total retail sales.

Food & Drink

Food sales growth was little changed from October, when it had slowed to its weakest since June. Promotions continued to do well as shoppers remained cautious, spending carefully and buying into special offers. Some noted premium lines doing well where people traded down from dining out, with meal deals, ready meals and chilled desserts popular. Soups, stews, pizza, pies and puddings did well, with root vegetables and winter greens.

Clothing

The unseasonably mild weather, especially against a much colder November 2010, hit sales hard, giving the worst year-on-year fall since August 2009. Mild weather and consumer caution hit winter ranges. Heavy outerwear, knitwear and warm accessories were very difficult as people put off buying. Menswear fell more than womenswear, while children's was flat. Shoppers often waited for promotions and sales events and considered carefully before committing to larger purchases. But aggressive discounting did tempt some customers, though at the expense of margins. Handbags and jewellery benefited from people accessorising existing clothes rather than splashing out on a whole new outfit. Premium lines held up for some.

Footwear

Overall sales were flat, with men's well down on a year ago, children's also down and women's showing a small gain. Unseasonably mild weather hit winter ranges and promotions and special offers were widespread. Boots were particularly challenging, as people did not want to commit to a larger purchase until they saw the need or found a good deal. Aggressive discounting and an early start to some clearance sales helped, but also hit margins. Smarter shoes, particularly plain styles which could be worn for work as well as leisure, were popular.

Electrical and Electronic

The underlying situation remained challenging and little changed from previous months. Sales were often deal-driven as consumers' uncertainty about jobs and income prospects continued to hit trade, especially for larger purchases. Shoppers bought into the promotions and discount offers, and purchases were often for replacement purposes rather than upgrades. White goods held up, helped by promotions and people improving homes rather than moving. Smaller appliances were mixed, with kitchen and cleaning products generally better than personal care as consumers concentrated on essentials and practical items. Computers continued to sell well, led by tablets and laptops. TVs were tough, particularly larger ones, with strong competition across stores.

Department Stores

The continued mild weather meant another difficult month for most. Clothing and footwear were hardest hit and Christmas lines had a mixed start. Beauty products held up and gift sets were popular. Widespread special sales days and promotions persuaded some shoppers to buy but consumer caution continued to dampen big-ticket purchases and discretionary items. Homewares were steady and often deal-driven.

DIY/Gardening

The mild weather helped outdoor projects such as garden care and tidying and exterior maintenance, but hit heating products. Indoor DIY and décor continued to benefit from the trend to improving rather than moving home, as well as people spending more time at home. But major home improvements were still affected by consumer uncertainty about job cuts and personal finances.

Homewares

Home accessories and house textiles sales weakened, both falling below their year-earlier level. Promotions and special sales events helped some, especially where consumers could justify purchases as replacement needs. Duvets, bed linens and soft furnishings struggled in the mild weather. The more practical areas such as kitchenware, floorcare and lighting were brighter spots as consumer uncertainty and tight household budgets meant essentials continued to take priority over discretionary and decorative items.

Furniture and Floorcoverings

Sales remained down on a year ago with big-ticket purchases very tough. Fitted kitchens, bathrooms and bedrooms struggled, hit by fragile consumer confidence. Floorcoverings and fitted carpets also suffered. New ranges and promotions helped some.

Health and Beauty

Toiletries and cosmetics sales showed their first year-on-year fall for two years, despite various special deals and discounts. Cough/cold and winter skincare struggled in the mild weather. Fragrances were mixed and often promotion-driven. Gift toiletries had a good start for some but amid widespread competition across stores.

Leisure Goods

Print book sales, especially paperback fiction remained very tough and well down on a year ago, hit by consumer caution and the growth in e-books. E-readers remained popular. Toys were mixed, amid some aggressive discounting and special pre-Christmas deals with strong competition between supermarkets and specialists.

RETAIL SALES VALUE: % change year-on-year

Month	2009		2010		2011
	Like-for-like	Total	Like-for-like	Total	Like-for-like	Total
January	1.1	3.2	-0.7	1.2	2.3	4.2
February	-1.8	0.1	2.2	4.5	-0.4	1.1
March	-1.2	0.6	4.4	6.6	-3.5	-1.9
April	4.6	6.3	-2.3	-0.2	5.2	6.9
May	-0.8	0.8	0.8	3.0	-2.1	-0.3
June	1.4	3.2	1.2	3.4	-0.6	1.5
July	1.8	3.6	0.5	2.6	0.6	2.5
August	-0.1	2.2	1.0	2.8	-0.6	1.5
September	2.8	4.9	0.5	2.2	0.3	2.5
October	3.8	5.9	0.8	2.4	-0.6	1.5
November	1.8	4.1	0.7	2.8	-1.6	0.7
December	4.2	6.0	-0.3	1.5
Jan – Nov average	1.2	3.1	0.9	2.9	-0.2	1.8
Jan – Dec average	1.5	3.4	0.8	2.8

Source: BRC-KPMG RSM (food & drink data from IGD)

Food/Non-Food Quarterly Analysis: % change year-on-year

3-Month Average	Like-for-like			Total
	Food	Non-food	All Sales	Food	Non-food	All Sales
Sep – Nov 2010	2.2	-0.5	0.6	4.4	1.1	2.5
Oct – Dec	2.1	-0.8	0.4	4.4	0.6	2.2
Nov 2010 – Jan 2011	1.4	0.4	0.8	3.9	1.9	2.7
Dec 2010 – Feb 2011	1.0	0.1	0.5	3.6	1.3	2.2
Jan – Mar 2011	-0.3	-1.1	-0.8	2.2	0.0	0.9
Feb – Apr	2.1	-1.3	0.1	4.6	-0.2	1.8
Mar – May	1.9	-2.0	-0.4	4.4	-0.8	1.3
Apr – June	2.6	-0.6	0.8	5.3	0.8	2.7
May – July	0.9	-1.8	-0.6	3.6	-0.4	1.3
June – Aug	1.4	-1.5	-0.2	4.3	0.0	1.8
July – Sept	2.1	-1.4	0.1	5.1	0.1	2.2
Aug – Oct	1.8	-1.8	-0.3	4.9	-0.3	1.9
Sept – Nov	1.5	-2.1	-0.6	4.6	-0.5	1.7
Jan – Nov 2011 ave.	1.4	-1.3	-0.2	4.2	0.0	1.8
Jan – Nov 2010 ave.	1.7	0.4	0.9	3.8	2.3	2.9

Source: BRC-KPMG RSM (food & drink data from IGD)

3-Month Averages

The three-month weighted average is calculated by using the monthly weighted results for both food and non-food categories, and applying a weighting to the result to take into account the 4-4-5 week trading pattern for the months covered.

Notes:

The BRC-KPMG Retail Sales Monitor measures changes in the actual value (including VAT*) of retail sales, excluding automotive fuel. The Monitor measures the value of spending and hence does not adjust for price or VAT changes. If prices are rising, sales volumes will increase by less than sales values. In times of price deflation, sales volumes will increase by more than sales values.

Retailers report the value of their sales for the current period and the equivalent period a year ago. These figures are reported both in total and on a 'like-for-like' basis.

* VAT changes: from 17.5% to 15% on 1st Dec 2008; to 17.5% on 1st Jan 2010; to 20.0% on 4th Jan 2011.

Total sales growth is the percentage change in the value of all sales compared to the same period a year earlier. The total sales measure is used to assess market level trends in retail sales. It is a guide to the growth of the whole retail industry, or how much consumers in total are spending in retail – retail spending represents approximately one-third of consumer spending. It is this measure that is often used by economists. Many retailers include distance sales as a component of total sales.

'Like-for-like' sales growth is the percentage change in the value of comparable sales compared to the same period a year earlier. It excludes any spending in stores that opened or closed in the intervening year, thus stripping out the effect on sales of changes in floorspace. Therefore like-for-like sales growth will always be lower than total sales growth. Many retailers include distance sales as a component of like-for-like comparable sales.

The like-for-like measure is often used by retailers, the city and analysts to assess the performance of individual companies, retail sectors and the industry overall, without the distorting effect of changes in floorspace.

Non-Food Non-Store sales are transactions which take place over the internet, or via mail order or via telesales. Non-Food Non-Store sales growth is the percentage change in the value of all non-food non-store sales compared to those in the same period a year earlier. It is a guide to the growth of sales made by this non-store channel. It should be noted that Non-food Non-store sales are still a very small proportion of total UK retail sales. Estimates based on ONS figures show about 8 per cent of total UK retail sales (food and non-food) are achieved via the non-store channel.

The responses provided by retailers within each sales category are weighted (based on ONS weightings) to reflect the contribution of each category to total retail sales, thus making it representative of UK retail sales as a whole. Because the figures compare sales this month with the comparable period last year, a seasonal adjustment is not made. However, changes in the timing of Bank Holidays and Easter can create distortions, which should be considered in the interpretation of the data.

As well as receiving sales value direct from the retailers in the scheme the BRC-KPMG Retail Sales Monitor also receives food and drink sales value data from the IGD's Market Track Scheme.

In its role as sponsor of the BRC-KPMG Retail Sales Monitor, KPMG is responsible for the aggregation of the retail sales data provided by the retailers on a weekly basis. This data consists of the relevant current week's sales data and comparative sales figures for the same period in the prior year. The aggregation has been performed by KPMG on data for periods following 2 April 2000 and equivalent prior periods. The accuracy of the data is entirely the responsibility of the retailers providing it. The sponsorship role has been performed by KPMG since 10 April 2000 and save for the aggregation of comparative sales figures for the period from 2 April 2000 it is not responsible for the aggregation of any data included in this Monitor relating to any period prior to 2 April 2000. The commentary from KPMG is intended to be of general interest to readers but is not advice or a recommendation and should not be relied upon without first taking professional advice. Anyone choosing to rely on it does so at his or her own risk. To the fullest extent permitted by law, KPMG will accept no responsibility or liability in connection with its sponsorship of the Monitor and its aggregation work to any party other than the BRC.

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