June retail sales in the UK were lackluster, recording the lowest like-for-like sales growth since February 2021, according to the BDO High Street Sales Tracker (HSST). Despite this overall disappointment, the fashion sector stood out as a strong performer. However, concerns about the state of the retail industry as a whole persist.
Retailers are facing significant challenges, as highlighted by Sophie Michael, head of retail and wholesale at BDO. Consumer confidence is at historically low levels, real wages are declining to a 20-year low, and interest rates are expected to rise. These factors do not bode well for retailers who are already grappling with various issues.
The recent announcement of Prime Minister Boris Johnson’s impending resignation further adds to the uncertainty in the business environment. The retail sector, along with its customers, is seeking stability and clear direction from the government. Unfortunately, it is unlikely that this will be provided in the near future, exacerbating concerns within the industry.
The latest BDO High Street Sales Tracker report provides insights into the state of UK retail sales. While the 8.4% overall sales growth compared to June 2021 may initially seem positive, it is actually the lowest rise in 16 months. Moreover, much of this growth can be attributed to inflation, which is currently at historically high levels after years of low-single-digit price increases.
The report also sheds light on the performance of online retail. Total non-store like-for-like sales only grew by 1.6% in June, which is disappointing considering the sector’s previous growth of 8.2% in June 2021. This suggests that online sales have returned to a more normal level after the pandemic, emphasizing the strong preference for physical shopping among consumers.
The month of June witnessed a slow start, with total sales growth of only 4.65% in the first week, including the Platinum Jubilee bank holiday. Sales increased by 7.63% in the second week and 7.3% in the third week. The final week of the month saw the strongest growth, with sales jumping 18.61% compared to the same period in 2021.
The fashion sector played a significant role in driving sales growth. Despite a sluggish start in early June, fashion saw a total like-for-like growth of 15.2%, compared to a surge of 73.7% in the same period last year when lockdown restrictions were lifted. The need to update wardrobes for summer occasions such as returning to the office, going on holiday, or attending social events contributed to the strong performance of the fashion sector.
On the other hand, the homewares category, which experienced a boom during the pandemic, had a tough month with an 8.8% decline. This marks the third negative month for the category this year.
Sophie Michael commented on the results, acknowledging that although the fashion sector has benefited from consumers refreshing their wardrobes for summer holidays, the weak sales growth for online retailers and the decline in the homewares sector indicate that consumers are tightening their discretionary spending. Retailers with high levels of stock are now faced with the challenge of effectively managing their inventory and working capital to navigate this period of unprecedented challenge.
In the end, retailers are looking to the government to take action in controlling inflation, addressing the cost-of-living crisis, and creating economic conditions that support the growth of the retail sector. These measures are vital for the industry to flourish amidst ongoing challenges.
Useful links:
1. BDO High Street Sales Tracker
2. Retail Gazette
