Retail Sales fall for First Time in Ten Months

Posted on 13 March, 2014 by Kirsten Kennedy

The retail industry has become increasingly buoyant in recent months, with categories such as home ware and furniture leading many retailers to hope that the difficulties brought on by the financial crisis are firmly behind them. However, the fragility of the retail recovery is demonstrated by the news that High Street sales dropped in February – the first fall seen since last April.

Retail-Sales-fall-for-First-Time-in-Ten-Months

Like for like retail sales dropped by 1 per cent during the 28 day period when compared to the same time last year.  This is particularly disappointing as January, the traditional “slump” month for the retail industry, saw a 3.9 per cent climb in like for like sales.

Analysts have attributed the poor weather for the plummet in sales, especially as online sales managed to post an impressive 14.3 per cent increase. While this is a slower rate of growth than the six month average increase of 15.8 per cent per month, it is significantly higher than the 12.3 per cent growth recorded in February of last year and indicates that online shopping is building momentum year on year.

The results, collated by the British Retail Consortium/KPMG Retail Sales Monitor, showed that grocery retailers were hit particularly hard during February with a 1.7 per cent drop in sales over the past 3 months. Compared to the 3.5 per cent increase in non-food like for like sales during the same period, this is a very poor showing and demonstrates the need for chains such as Tesco, Asda and Sainsbury’s to invest further in cost cutting measures.

KPMG head of retail, David McCorquodale, believes the competitiveness of the grocery sector played a role in the drop, but also voices the need for the government to urgently address the lack of disposable income still dragging consumers down.

He says; “The grocery sector remains fiercely competitive – February’s figures were impacted by the discounting campaigns launched by the value grocers, which caused a sharp slowdown of overall price inflation in the food sector.

“Overall, sales were pretty flat, which serves as a reminder that recovery is far from certain.

“Retailers need the government to deliver measures in the forthcoming Budget which will give shoppers more pounds in their pocket, but more importantly imbue them with the confidence to spend them.”

One theory expounded by experts is that families are choosing to cut back on grocery shopping in favour of saving for home accessories and furnishings – these categories were two of the only bright spots in an otherwise gloomy report. However, the rising cost of gas and electricity bills may also be playing a part.

Although the results seem very negative at present, it must be remembered that this February is being compared to an exceptionally strong 2.7 per cent rise in sales this time last year. Only time will tell whether the retail industry will rebound in the coming months; or whether last month marked the entry into another period of uncertainty for retailers.




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