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UK store retail sales grow between May and June, as online slows, finds ONS…

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Sales in the three months to June 2019 have shown a small increase of 0.7% year on year, but have bucked up by a more considerable 1.6% compared to May 2019, according to the latest ONS Retail Sales figures.

According to the ONS, the quantity bought in June 2019 increased by 1.0% when compared with May 2019; non-food stores provided the largest contribution to this growth.

The year-on-year growth rate shows that the quantity bought in June 2019 increased by 3.8%, with growth across all sectors except department stores, while May 2019 was at 2.2% for the year-on-year growth rate.

Internet sales increased by 8.0% for the amount spent in June 2019 when compared with June 2018, with all sectors showing growth except food stores.

In contrast, internet sales fell on the month by 0.7% when compared with May 2019. Non-store retailing was the largest contributor to this fall at negative 3.1%. Online sales as a proportion of all retailing fell to 18.9% in June 2019, from the 19.3% reported in May 2019.

However, online sales have seen a boost in June, with IMRG CapGemini reporting that online retail sales rose by +8.5% Year-on-Year (YOY) in June, representing the strongest growth so far this year.

Meanwhile, in June 2019, ONS estimates for both the amount spent (value) and quantity bought (volume) in retail sales showed growth across all measures. Both the amount spent and the quantity bought in the retail industry reported strong growth of 4.3% and 3.8% respectively when compared with a year earlier. 

The monthly picture also showed strong growth of 1.3% for the amount spent and 1.0% for the quantity bought.

In the three months to June 2019, the amount spent and the quantity bought both increased by 0.7% respectively when compared with the previous three months. This has slowed from the stronger growth of 1.5% in the amount spent and 1.6% in the quantity bought in the three months to May 2019.

Department stores continued the general downward trend as the only sector to show a fall in non-food stores, at negative 0.2% for the amount spent and negative 0.4% for the quantity bought. This was the sixth consecutive month-on-month decline for department stores.

Clothing stores reported growth in both the amount spent and quantity bought in June 2019 of 1.5% and 1.2% respectively; partly recovering from the strong falls reported in the previous month at negative 3.4% for the amount spent and 3.8% for the quantity bought. Feedback from retailers suggested this was a consequence of consumers reacting well to summer sales following a slow uptake in the previous month.

Other stores is the largest component within non-food stores and with a month-on-month increase of 3.2% for both the quantity bought and the amount spent, this store type provided the largest contribution to the monthly growth in non-food stores.

Kyle Monk, Head of Insight and Analytics at the British Retail Consortium, comments: “The ONS Retail Sales Index has defied both analyst predictions and generally reported sentiment from retailers. The BRC-KPMG Retail Sales Monitor tracks a substantial part of the UK retail market and showed a decline of 1.3%. Similarly the Visa UK Consumer Spending Index showed a 1.4% decline in spending for the month. Given that last June 2018 was such a strong trading period, it is very difficult to believe that nationally year-on-year sales rose by 4.0%.”

Monk adds: “Even if one were to trust in the optimistic outlook presented by the ONS, what is clear is that retailers continue to face disproportionate cost pressures, both through increasing business rates and uncertainty caused by Brexit. Policy makers now have just 22 days in Parliament to present industry with solutions before a potential no deal exit from the European Union, which will have disastrous consequences for British Retail.”

Analysts’ analysis

Ian Geddes, head of retail at Deloitte, comments: “After a damp May, retail sales were boosted in June with sales values and volumes both up month-on-month by 1.3% and 1%, respectively, and up 4.3% and 3.8% compared to the same period last year. June’s food sales also increased, albeit at a slower rate of 0.6% year-on-year. Whilst a coolerSpring Bank Holiday may have failed to spark the first of the year’s barbecues, sales in non-foodedged up 0.7% month-on-month, boosted by the re-commerce market as antiques and charity shops attracted the growing ‘conscious consumer’. After a period of clothing sales declines, consumers have also reacted well to end-of-season discounting, with clothing sales growing by 1.5% compared to May 2019.”

Geddes continues:“Online sales, which have gradually slowed since the start of the year, fell another -0.7% this month, accounting for 18.9% of total retail sales. At a macro level, unemployment, interest and inflation rates have all remained low throughout the first half of the year, with household incomes consistently high. Regardless, consumer confidence has remained flat and goods purchases held off, often in favour of experiences.”

He says: “The start of summer’s high season has so far brought a bumper month for sports in women’s football, tennis and cricket, and retailers should expect a much sunnier sales forecast for the remainder of the season. Likewise, with large-scale campaign days, many high street retailers will boost their own sales through price-matched and secondary purchases.”

Stephen Hubble, Chief Analyst at Centtrip, says: “The High Street remains beleaguered as top household names like Debenhams, Mothercare and more recently Arcadia Group – the owner of Top Shop and Miss Selfridges – were forced to close stores and seek lower rents.”

Hubble adds: “As with all data releases these days, the finger will, no doubt, be pointed at Brexit and uncertainty around it, causing consumers to sit on their hands and put off non-essential purchases. This also fuels fears that Britain’s economy has come to a standstill as markets and investors are watching closely the drawn-out Tory leadership race. The question is whether or not retailers can weather further uncertainty and inevitable economic shocks in a no-deal Brexit scenario if Theresa May’s replacement will allow the UK to fall off a cliff. Or could there be a longer Brexit negotiation, which would take an even bigger toll on Britain’s suffering High Street? Either scenario would be detrimental for the retail sector and would weigh further on the Pound.”

An up-beat Geddes concludes: “Retailers may not be high and dry just yet but, with the late arrival of summer sunshine, sales may just be starting to warm up.”

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