Industry

UK retail sales rise in warm June: BRC

The timely arrival of summer helped boost UK retail sales both online and offline in June, data from the British Retail Consortium (BRC) suggests. But there are warnings that, like the weather, the upturn may not last.

During the month, which on some days saw the highest temperatures seen for 40 years, UK retail sales rose by 1.2%, on a like-for-like (LFL) basis that strips out the effect of store openings and closures, and by 2% in total. Online sales grew by 10.1% in June, ahead of the three-month trend of 8.4%, to account for 22% of total retail sales.

Over the three-month period to the end of June, in-store sales declined by 0.7% in total, and by 1.2%, LFL, and ecommerce sales contributed 2.4 percentage points to the growth of non-food retail sales during the month.

Helen Dickinson, chief executive of the BRC [IRDX VBRC], said: “The arrival of summer provided a welcome pick-up to sales growth in June, particularly to non- food categories which saw a reversal in fortunes after a prolonged period of sluggish growth. Leisure pursuits and activities spurred consumer spending on summer clothing, beauty products and outdoor toys, which were also boosted by gift purchases over Eid.

“The six-month average, buoyed by June’s strong performance, now paints a slightly rosier picture for retail sales. But on closer inspection the year on year numbers belie the fact that rising food prices are responsible for the main component of growth and have prompted more cautious spending towards discretionary non-food items.

“Online continues to take the lion’s share of growth, although contribution from stores increased slightly in June as it seems shoppers headed out with specific purchases in mind, rather than just to browse.

“Looking ahead, there’s a question mark over whether this spending momentum will last, as household expenditure is increasingly squeezed from rising inflation and slowing wage growth. The reality is that retailers’ efforts in absorbing mounting cost pressures into their margins are already being tested, so the Government must have the consumer front of mind as it enters the UK’s trading negotiations with the EU, to avoid any further cost increases to retailers and their customers.”

Paul Martin, UK head of retail at KPMG [IRDX VKPM], said: “After a challenging month in May, retail performance in June appears to have rebounded both online and on the high street. However, whilst the sunshine may have prevailed this month, retailers would be wise to remain cautious.

“For fashion retailers the boost in sales could not have come soon enough. Following a challenging year so far, it appears the higher temperatures thankfully provided an increased interest in summer collections. Elsewhere, the sun also shone on health and beauty sales too, with the category continuing to be a top performer.

“Whilst the latest figures are definitely more favourable than last month’s, retailers must look at the bigger picture. Inflation and household debt are fuelling part of this retail growth, meanwhile the industry is undergoing significant structural changes more broadly. The retailers succeeding are those embracing change.”

Commenting on food sales, Joanne Denney-Finch, chief executive of grocery research body the IGD, said: “According to the Met Office, England enjoyed the second equal warmest June on record. Alongside rising inflation, this helped the food and grocery sector to experience a three-month growth trend that is now at its highest since March 2013.

“The inconclusive election result has introduced further uncertainty and this will test the sector’s momentum. However, there has also been a further injection of shopper patriotism with 47% saying it is very important to support British producers, up from 41% last September.”

Mentioned in this piece…

British Retail Consortium

British Retail Consortium

IRDX: VBRC

The British Retail Consortium (BRC) is the lead trade association representing the whole range of retailers, from the large multiples and department stores through to independents, selling a wide selection of products through centre of town, out of town, rural and virtual stores. (more…)

KPMG

KPMG

IRDX: VKPM

KPMG in the UK has over 10,000 partners and staff working in 22 offices and is part of a strong global network of member firms. Our vision is simple – to turn knowledge into value for the benefit of our clients, people and our capital markets. Our innovative spirit inspires what we do and how we do it, providing valuable benefits for clients, employees and stakeholders. Constantly striving to be better lies at the heart of what makes us different. (more…)

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