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News - 12 September 2009
Serious shopper - a rare breed,

Retailers need to prepare for tough times ahead

The British Retail Consortium (BRC) has warned that we may all have jumped the gun by rejoicing in the much heralded end of the recession. BRC suggests that the upturn in retail sales in June and July was nothing more than a brief interlude or perhaps a lifting of spirits brought on by a bit of sunshine. This growth was not thought to be sustainable and August's figures bear that out.

UK retail sales fell 0.1% on a like-for-like basis from August 2008. On a total sales basis, the figure rose 2.2% against a 1.4% gain in August 2008.

This August, food sales continued to do better than non-food. Food sales growth edged up only slightly from July’s low. Clothing and footwear weakened further. Homewares and furniture sales fell back below year-earlier levels after July’s weather- and clearance-driven growth.

Non-food, non-store sales (internet, mail-order and phone sales) in August were 7.9% higher than a year ago but the weakest since May.

Stephen Robertson, Director General, British Retail Consortium, said, ““The stronger figures of June and July haven't been sustained. It's clear the deceptively good sales growth of those months was due to summer sun and price cuts – not any major revival in how customers are feeling. What spending we now have is all about value and essentials.

“In August, food sales continued to do better than non-food. After two months of growth, clothing and footwear are well down. People are holding off buying autumn and winter clothing till they actually need it.

“Most people are still very reluctant to spend on expensive household items – unless they’re sufficiently discounted. As we head into autumn, we mustn't make too much of any positive sales growth because the comparison will be with very weak figures a year ago when total sales growth dipped below zero."

Helen Dickinson, Head of Retail, KPMG, said, “The improvement in home spending which boosted performance in July did not continue into August. Also, the timing of the bank holiday, which fell into August's results for 2008 but not in 2009, did not help the overall figures which are below those we have seen for the last couple of months. Like-for-like sales across most sectors, with exceptions such as food and children’s clothing, were negative in August.

“The results for the month and the rest of the year need to be considered in the light of the performance last year, which continued to weaken as the year progressed. Negative like-for-like sales on the back of the same situation last year is leaving many retailers with some serious challenges around controlling costs and generating cash.”

Joanne Denney-Finch, Chief Executive, IGD, said, “Sales of food and drink in August were marginally better than July, despite inflation starting to cycle out of the system as we compare figures this year with steep rises in 2008.

“The summer has seen increased promotional activity in the grocery sector. Whether banking on the sunshine with barbecue pack deals or investing in revamped loyalty card schemes, grocers are competing fiercely to provide value for shoppers. Our latest consumer research shows that shoppers are ‘deal hungry’ with 23% preferring buy-one-get-one-free, and 17% opting for reduced-price offers, like ‘half-price’ or ‘25% off’.”

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