The British Retail Consortium (BRC) has warned any recovery in sales on the UK commercial property high street “remains illusory”. According to the BRC, commercial property retail sales fell last month, hit by weak sales of shoes, home wares and clothing.
The BRC said UK like-for-like sales dropped 0.3 per cent last month compared with February 2011.
Financial activity in the services sector, which covers hairdressing to banking, remained optimistic during February, however could only record 53.8 in contrast to 56, which had been a 10-month peak, in January.
Director General of the British Retail Consortium, Stephen Robertson, commented: “The reality of weak sales shows that a convincing revival remains illusory.”
Despite the fact food sales picked up in February, helped by consumers stocking up in the extremely cold weather, non-food sales deteriorated further, even with continued discounts and promotions in the post-Christmas sales. Mr Robertson said: “Food picked up but non-food sales deteriorated with goods affected by the slow housing market among those particularly struggling.”
Footwear, clothing and home ware sales were worse in February compared to January and December, particularly for higher purchases as shoppers became more cautious.
The mixture of weak high street sales and a slowing services sector will concern the chancellor George Osborne as it comes after manufacturers reported poorer sales in February. Up until last week, economic indicators revealed a more encouraging mood and several economists projected the UK would only just escape a double-dip decline. The most recent surveys of business health appear to show that trend has reversed.
Osborne is likely to tell Parliament later this month that the changing and unpredictable nature of the recovery continues to limit his room for manoeuvre. He is likely to dismiss calls for his budget on 21 March to provide a spending increase in response to the dwindling economic data.
Mr Robertson said that decreasing inflation has reduced the squeeze on household budgets and halted the slide in consumer confidence. Nevertheless consumer confidence is now at risk from fuel price increases and doubt over the budget.
Mr Robertson commented: “Unemployment is expected to rise further causing increased nervousness about job security, which is keeping confidence fragile. Any sense of improving optimism is not yet translating into more spending.”
On an overall basis, sales were up 2.3 per cent, compared to a 1.1 per cent increase in February 2011. However the BRC pointed out that overall sales growth is still below inflation, so consumers are in fact buying less than they did a year ago.
At the same time reductions are eating into margins.
Mr Robertson further added: “In this climate of continued caution, the Chancellor must use the budget to hold back business costs, which will support jobs, growth and the much-needed consumer turnaround.”
Head of retail at accountancy firm KPMG, Helen Dickinson, said: “February’s results were similar to January’s but with very different dynamics.
“Food performed better than in the previous month but many non-food sectors struggled. The timing of half term caused plenty of variability during February and swings in performance by individual retailers’ makes business planning all the more challenging.”
She added that shoppers continue to remain disinclined to spend unless they are tempted with promotions. This means that although the market is still growing a little in headline sales terms, profitability continues to be eroded through loss of margins.
Ms Dickinson said: “Many retailers feel they’re fighting very hard to stand still at best and don’t see any light at the end of the tunnel.”
She further added: “However, there are retailers out there who deliver what the customer wants and needs, in terms of product, brand and price, which proves that if the proposition is spot on it is still possible to outperform the market and the competition.”
However, Chief Executive at research company IGD, Joanne Denney-Finch, was more optimistic. She said: “These results are an improvement on January and a sign that consumer confidence is heading in the right direction.
“Our research shows that, although half of shoppers still believe they will be worse off in the year ahead, this is a more positive picture than last year when 61 per cent felt this way.”
She further added: “With the exception of the snowy start to February, the winter as a whole has been milder than in recent years-which have been good for sales. Valentine’s celebrations also provided a modest boost.”
Sales growth in the non-store, non-food (mail order, internet and phone) market decreased further in February after picking up sharply in December. Sales were 9.9 per cent up on a year ago, down from 11.3 per cent in January and 18.5 per cent in December and also below the 10.4 per cent in February 2011.
