UK retail sales in September faced challenges as overall growth slowed down compared to previous months, according to the BDO High Street Sales Tracker. Total like-for-like (LFL) sales increased by 2.8% in September 2022 compared to the same period in 2021, but experts caution that this may not accurately reflect retailers’ actual performance.
One of the main factors affecting sales is inflation, with prices rising rapidly. This means that the apparent increase in sales driven by inflation may not truly reflect increased consumer spending, and the volume of sales may actually be significantly lower.
Last year, sales experienced a significant jump of 19.7% in September, but this was largely due to the retail sector recovering from the impact of the Covid-19 pandemic. The weak performance in September 2022 follows poor results in August as well.
When examining September in more detail, the first week saw a 3.88% increase in total LFLs compared to the same week the previous year. The second week saw the highest growth at 4.86%. However, there was a noticeable slowdown in the second half of the month, with sales growth dropping to 2.76% and 1.33% in the third and fourth weeks, respectively. These figures are particularly concerning when considering the double-digit inflation rates, which essentially means that a 1% or 2% increase in sales represents a decline in real terms. Additionally, the fourth week coincided with a public holiday to commemorate the funeral of Queen Elizabeth, which likely had an impact on sales.
Despite the overall challenges, the fashion sector has experienced 19 consecutive months of positive total LFL sales. Fashion sales in September increased by 6.7% compared to the previous year. However, this growth indicates a cautious consumer approach to discretionary spending, as individuals are hesitant about investing in autumn and winter wardrobes.
On the other hand, homewares sales saw a decline of 6.3% compared to the previous year. This decrease can be attributed to consumers tightening their budgets after spending significant amounts on home improvements during the Covid-19 lockdowns.
Retailers that rely on imports are facing additional challenges due to the weakening pound against the US dollar and euro. The cost of imported products is rising, eating into retailers’ already narrow profit margins. However, the weak pound does offer an opportunity for overseas tourists to do their Christmas shopping in the UK, benefiting flagship stores in major cities.
To mitigate the impact of these challenges, retailers must focus on operational savings and carefully select products that are relevant and appealing to their target customers. This will help prevent excess stock at the end of the season. However, given the uncertain state of the wider economy, retailers can only do so much to protect their businesses. It is evident that the sector needs to prepare for a challenging winter ahead.
Useful links:
– BBC – UK high street sales slow down as inflation takes its toll
– BDO – UK retail sales slow during challenging September
