Retail sales heat up, but volume still down

Retail sales heat up, but volume still down

The British Retail Consortium (BRC) and KPMG released research reporting a 2.3% increase in sales in July (on a total basis), a 1.6% like-for-like basis increase from July 2021.

Although there is an increase in sales, volume is down. This is attributed to rising inflation and households cutting back on spending amid rising energy bills.

Commenting on the results, Helen Dickinson, BRC’s chief executive, said: “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 at KPMG, said: “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.”

He added: “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.”

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