Retail Sales Monitor
Summer Sun Stimulates Spending
Helen Dickinson OBE, Chief Executive, BRC:
Sales improved in July as the heatwave boosted sales of hot weather essentials. Summer clothing, picnic treats, and electric fans all benefitted from the record temperatures as consumers made the best of the sunshine. However, with inflation at over 9% many retailers are still contending with falling sales volumes during what remains an incredibly difficult trading period.
Consumer confidence remains weak, and the rise in interest rates coupled with talk of recession will do little to improve the situation. The Bank of England now expects inflation to reach over 13% in October when energy bills rise again, further tightening the screws on struggling households. This means that both consumers and retailers are in for a rocky road throughout the rest of 2022.
Paul Martin, UK Head of Retail, KPMG:
The sun came out for retailers in July, as like for like sales grew 1.6% on last year. Against a backdrop of the cost of living crisis and on-going reports of low consumer confidence actual sales are still holding up. Online retailers also saw the benefit of warmer weather with sales growth falling more slowly, by just 3.9% on July 2021.
Despite consumer polls suggesting confidence is at an all-time low, this hasn’t translated to money not being spent at the tills, as consumers are determined to enjoy delayed holidays and an unrestricted summer. Pent up demand, especially for new clothes, has so far been at significant enough levels to keep the overall retail sector in relatively good health. With travel and summer socialising back on the agenda, retailers will be hoping the feel good factor continues into August.
However, the summer could be the lull before the storm with conditions set to get tougher as consumers arrive back from summer breaks to holiday credit card bills, another energy price hike and rising interest rates. With stronger cost of living headwinds on the horizon, consumers will have to prioritise essentials, and discretionary product spending will come under pressure. As margins continue to be challenged, and costs continuing to rise, a significant drop in demand come the Autumn will have detrimental impact on the health of the retail sector. Truly understanding individual customer buying patterns and being able to differentiate these will become increasingly more important for the sector.
Food & Drink sector performance, Susan Barratt, CEO, IGD:
July’s food and drink value sales were again flattered by inflation, masking some ongoing dips in sales volumes. Shoppers are genuinely tightening their belts by buying fewer items in addition to switching stores and buying more private label products.
Our Shopper Confidence Index improved a little in July, no doubt boosted by England’s Lionesses successful Euro 2022 football campaign. Plus, the heatwave and one in four families receiving the first cost of living payment, fewer were impacted by rising energy bills (68% compared to 74% in April ’22). However, with food price inflation forecast to increase in the coming months and Ofgem expected to announce a significant increase in the energy price cap at the end of August, there are still significant challenges ahead.
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