Retail sales spark fears over festive spending
Fears were growing for the high street and the crucial Christmas trading period after the Government confirmed that the recent recovery in retail sales had stalled.
On the same day that the high street bellwether John Lewis said its half-year operating profits had more than halved, the Office of National Statistics revealed that retail sales in August were flat on the previous month — which was worse than the 0.1% rise that City analysts expected. The fashion retailer French Connection added to jittery retail nerves with widening losses of £12.8m in the half-year to 31 July.
The weak data comes a day after Simon Wolfson, the chief executive of Next, warned the retail sector could be in for a tough year and that consumer spend may not change significantly, even if the recession ends. In August, there was “no growth” in total retail sales volumes, which compared to growth of 0.4% in July and 1.2% in June, said ONS. The British Retail Consortium has posted similar data.
Stephen Robertson, the director general of the BRC, said: “With unemployment rates at a 14-year high and predicted to increase into next year, most people are still very cautious about spending on expensive items — unless there are sufficient discounts.”
The August figures were boosted by the grocers, which grew sales volumes by 0.7%, but non-food stores continued to find life tough and sales fell by 0.6%, according to the ONS.
Tarlok Teji, the UK head of retail at Deloitte, the accountancy firm, said: “The supermarkets have done well as consumers have gravitated towards them for their food essentials, but also their non-food offering.”
On an annualised basis, total retail sales in August were 2.1% higher than the same month in 2008, said the ONS.
Graeme Maclaughlin, director of Barclays Commercial Bank in Northern Ireland said: “Growth still looks generally healthier year on year, and across the last three months, despite a levelling off between July and August and some downward revisions to past data. A slight lull in sales over August could be attributed to a number of seasonal factors such as holidays and the weather, and more people remaining at home this summer seems to have had |little effect on both on-line and the high street sales.
“Shoppers may also be mulling over the forthcoming rise in VAT, leading them to consider picking-up larger discretionary items in advance of any percentage hike early in the New Year.”
It was a tale of two divisions at the John Lewis Partnership (JLP), which also owns the grocer Waitrose. The eponymous department store chain posted operating profit down by 50.9% to £20.9m. Its home department suffered a 8.1% fall in sales, as the dire housing market hit sales of white goods, electricals, homewares and furniture. Charlie Mayfield, the chairman of JLP, said: “The number of people moving house since the beginning of 2008 has halved and then halved again.”