High street sales on rise across UK but retailers face profit concerns
UK retail sales jumped in August as shoppers continued to spend despite strong price rises. Sales were up 2.4% on this time last year, the 52nd consecutive month of year-on-year increases and exceeding the expected 1.1% rise, as consumers ignored the pound’s post-referendum slump and inflation, the Office for National Statistics figures show
Sales rose 1% month-on-month, exceeding expectations for a much smaller increase of 0.2%.
Increased spending in non-food shops such as department stores and DIY outlets was behind the dramatic improvement.
Figures for the three months to August as a whole, which smooth out monthly volatility, show a 1.2% rise in sales growth from the same measurement of 0.7% in July. It came as prices increased across all store types, with non-food stores and non-store retailing recording their highest year-on-year price growth since March 1992, at 3.2% and 3.3% respectively.
ONS senior statistician Kate Davies said: “Within this month’s retail sales we are seeing strong price increases across all store types compared with a year ago, reflecting wider inflationary pressures.
“However, we are still seeing underlying growth in sales volumes, and strong growth in non-essential purchases as consumers continue to buy more from non-food stores.”
Ben Brettell, senior economist at Hargreaves Lansdown, said: “The UK consumer continues to show remarkable resilience, with retail sales in August blowing economists’ forecasts out of the water. Spending has defied expectations of a slowdown since the Brexit referendum, and currently seems to be holding up despite weak wage growth and above-target inflation.
“This could bode well for economic growth.
“The UK economy is heavily reliant on the consumer, and economists had expected falling real incomes to eventually translate into weak retail sales.
“If this fails to materialise, the economy could see a stronger second half to the year — though there are also growing concerns over the level of household debt, which is fuelling continued consumption in the absence of rising real wages.”
Meanwhile, profits at House of Fraser have come under strain after the launch of a new web platform and “significant discounting” took its toll on the retailer.
The department store chain, which has one store in Belfast, said half-year earnings sunk to an £8.6m loss, down from a £900,000 profit in 2016, as website sales suffered from the roll-out of a £25m online sales platform.
Elsewhere, B&Q owner Kingfisher has warned over a cautious outlook in the UK and France as profits took a hit from efforts to overhaul the business.
The group said adjusted pre-tax profits fell 5.7% to £394m in the six months to the end of July, as it faced £46m in costs linked to its transformation plans.
Kingfisher, which also owns DIY chain Screwfix, said it had to grapple with “business disruption”. Screwfix is expanding further in Northern Ireland, with two new planned stores.
It comes after B&Q cut more than half its store network here, resulting in the loss of around 300 jobs. It said the upheaval, coupled with a weaker performance in France, had knocked around 2% off like-for-like sales, which fell by 1.3% over the period.
Belfast Telegraph Digital