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Worst July for retail on record follows worst June on record while spend continues to shift online: BRC

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The British Retail Consortium says the worst June retail sales on record have been followed by the worst July on record. 

July 2019 sales grew by 0.3% in total, compared to July 2018, when sales grew by 1.6%, it said in its monthly retail sales report. That’s the lowest figure the BRC-KPMG Retail Sales Monitor has recorded since it started in 1995. Like-for-like overall sales, which strip out the effect of store – and business – openings and closures were up by 0.1%. Last year they were up by 0.5%. The longer-term three-month (-1.5%) and twelve-month (-0.2%) trends are moving further towards decline. 

Last month online sales grew by 4%, but overall retail sales were down by 1.3%.

Helen Dickinson, chief executive of the BRC, said: “While retailers will welcome the return to growth it has nonetheless been a punishing few months for the industry. The combination of slow real wage growth and Brexit uncertainty has left consumer spending languishing with the 12-month average total sales falling to a new low of just 0.5%.” She said demand had remained weak despite sporting highlights. “It is not just high streets that are suffering,” she said, “with non-food online growth also one percentage point below the 12-month average.”

“The challenging retail environment is taking its toll on many high street brands who must contend with rising import costs, a multitude of public policy costs and ever higher business rates. A coherent strategy for retail is needed. The Government should freeze future business rates rises and fix the appeals system before embarking on a wholesale reform of this broken tax system.”

The multichannel picture

A greater share of retail sales was made over the internet in July (29.8%) than a month earlier (28.4%) but growth remained weak online. The 3.7% growth recorded for ecommerce sales of non-food products in July compared to the same time last year was half the 7.5% growth recorded last July. Over the longer-term, the three-month average trend shows online non-food sales growing by 3.1% in total. The 12-month average growth rate came in at 4.7%.

While online sales of non-food grew slowly, in-store non-food sales were in decline falling by 4.1% in total in the three months to July, and by 4% LFL. That’s behind the 12-month average total decline of 2.6%. Across sales channels, non-food sales were down by 2.1% in total and 2% LFL over the three months.

Paul Martin, UK head of retail at KPMG, said: “The UK may have had record temperatures in July but retail sales were far from record-breaking at just 0.3% growth. While any growth is welcome after two months of decline, it’s clear that most players need more than sunshine to get back on their feet.

“Given the weather it’s unsurprising that shoppers reconsidered their wardrobe but it was online retailers who benefitted most once again. Online non-food sales overall actually grew by only 3.6% which is considerably lower than previous years.”

He added: “With consumer confidence holding up in the face of prolonged Brexit uncertainty shoppers are notably disengaged overall. The pressure continues to build between online and physical offerings, costs continues to rise and the demands of consumers continue to grow. The key question is, who can handle the heat?” 

‘Lacklustre’ food sales

Food sales were down by 0.3% in total and by 1% LFL, behind 12-month figures of 1.8% total average growth. This is the lowest three-month average since December 2014, excluding distortions from Easter trading. 

KPMG’s Martin said that while grocery sales had historically benefited from good weather, July sales were “lacklustre” and “a cause for concern.”

Susan Barratt, chief executive of grocery analyst the IGD said that the men’s cricket and the women’s football tams had both been good for business – but that similar sporting events last year meant “the year-on-year comparison was a draw with flat food and grocery sales”. 

She added: “There has been some inflation though, meaning a drop in real terms and the underlying conditions are tight for food retailers.”

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