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News - 14 November 2009

Retailers see best October for seven years

The British Retail Consortium has published sales figures for October and they look very encouraging. However, it is important to remember that the financial crisis was already mounting at this time last year so last year's figures were low.

UK retail sales values rose 3.8% on a like-for-like basis from October 2008, when sales had fallen 2.2%, due to turmoil in financial markets hitting consumer confidence. On a total basis, sales rose 5.9% against a 0.1% decline in October 2008.

Food sales growth slowed further, largely reflecting lower food price inflation. Clothing and footwear showed stronger growth than in September, but against a weak October 2008. Homewares and furniture sales also showed good gains, helped by some improvement in consumer confidence and the housing market. But the gains were against even larger declines a year ago.

Non-food non-store sales (internet, mail-order and phone sales) in October were 18.0% higher than a year ago compared with 11.9% in September. The faster growth rate in October than in September was in line with the improvement in store sales. Postal strikes prompted some online retailers to switch to other delivery services.

Stephen Robertson, Director General, British Retail Consortium, said, “These are encouraging results – the best like-for-like and total October sales growth since 2002. They are, however, compared to dreadful figures last year when the final three months were all negative. Throughout the recession food has consistently been one of the best performing sectors. But food sales growth has fallen to its lowest for 19 months with food inflation tumbling since this spring. By contrast, most non-food sectors were well up on last year. Children’s clothing, for example, received a big boost from half-term spending and Halloween.

“With less than 50 days to go before Christmas, retailers will be hoping improved consumer confidence will be sustained during the festive period and beyond. Shops have already started to battle it out for customers with a string of promotions and discounts. But 2010 has many uncertainties, including the likelihood of rising unemployment and tax increases.”

Helen Dickinson, Head of Retail, KPMG, said, “For the second month running the non-food sector has outperformed the food sector, bolstered by the strong performance of women’s and children’s clothing, women’s footwear, and furniture and flooring. As we approach Christmas, optimism is certainly up, particularly compared to the last quarter of 2008 when both total and like-for-like sales were increasingly negative as consumer confidence deteriorated. Retailers will be hopeful that this growth pattern continues and interest rates holding firm should also allow households some breathing space. However, the longer-term outlook remains considerably more challenging, given the economic backdrop, levels of unemployment, uncertainty regarding the impending VAT rise and the impact of future fiscal policy following next year’s election.”

Food & Drink – Joanne Denney-Finch, Chief Executive, IGD, said, “After a period of sustained inflation, food prices are levelling off. Food price increases have slowed consistently since February 2009, providing relief for hard-pressed shoppers with retailers working hard to pass on the benefits of more stable commodity markets.

“The contest for Christmas has started in earnest, with leading operators highlighting both grocery and non-grocery lines in their advertising. Both retailers and suppliers continue to promote heavily, price-cutting and flexing their ranges to meet shopper needs as we head into the UK’s second ‘Recession Christmas’ in a row.”


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