Drizzle dampens demand

Sales figures are not adjusted for inflation. Given that both the July SPI (BRC) and June CPI (ONS) show inflation running at very high levels, the rise in sales masked a drop in volumes once inflation is accounted for.

Covering the four weeks 2 – 29 July 2023

• UK Total retail sales increased by 1.5% in July, against a growth of 2.3% in July 2022. This is below the 3-month average growth of 3.5% and the 12-month average growth of 3.9%.
• UK Like-for-like retail sales increased by 1.8% in July, against a growth of 1.6% in July 2022. This was below the 3-month average growth of 3.3% and the 12-month average growth of 3.6%.
• Food sales increased 8.4% on a Total basis and 8.7% on a Like-for-like basis over the three months to July. This is above the 12-month Total average growth of 7.8%. For the month of July, Food was in growth year-on-year.

• Non-Food sales decreased 0.5% on a Total basis and 0.8% on a like-for-like basis over the three-months to July. This is below the 12-month Total average growth of 0.6%. For the month of July, Non-Food was in decline year-on-year.
• Over the three months to July, In-store Non-Food sales increased 1.2% on a Total basis and 0.8% on a Like-for-like basis since July 2022. This is below the Total 12-month average growth of 3.4%.
• Online Non-Food sales decreased by 6.9% in July, against a decline of 3.9% in July 2022. This is steeper than the 3-month average decline of 3.4% and the 12-month decline of 3.4%.

• The proportion of Non-Food items bought online (penetration rate) decreased to 34.7% in July from 35.3% in July 2022.

Helen Dickinson OBE, chief executive of the British Retail Consortium, said: “The slowing pace of retail price inflation fed through into slower sales this July. Spend was further depressed by the damp weather, which did no favours to sales of clothing, and other seasonal goods. Online spending was down again year on year as the post covid trend back to stores continued, leading to the lowest proportion of non-food sales online since the pandemic began.

“While consumer confidence is generally improving, it remains below longer term levels. And with last week’s rise in interest rates pushing mortgage rates up ever higher, the Government must get a handle on the economy, offering a solution to languishing GDP growth in a way that supports both households and businesses. Only by creating the economic conditions for future growth, will we see a meaningful improvement in the outlook.”

Paul Martin, UK head of retail | KPMG:  “As the storm clouds came out, shoppers retreated, with like for like sales growth a dismal 1.5% up in July. Furniture and food & drink were the best sellers, whilst the wet weather meant no need to restock summer wardrobes, with all categories of clothing falling into negative sales territory, in what is usually a busy month for clothing retailers.  Online sales continued to slide, falling nearly 7% year on year, with just a handful of categories such as furniture, health and beauty performing well.

“We are starting to see a big rise in the number of promotions that retailers are putting in place in order to get shoppers through the door, as they battle to keep market share.  Price conscious consumers are shopping more carefully, more aware of where bargains can be found and what they are getting for their money – which is biting hard into retail margins and profitability.  UK consumers have been hugely resilient throughout the cost-of-living crisis, but stubbornly high inflation coupled with rapidly rising interest rates will test their ability and willingness to keep on spending for the rest of this year.

“Both consumers and retailers are finding that they are having to get used to doing more with less as conditions remain incredibly challenging.”

Food & Drink sector performance | Sarah Bradbury, CEO | IGD:  “Food and drink sales continued to grow in July, although the rate of growth was the lowest since January. Sales growth was driven by inflation as volumes remained in negative territory, in part due to the unseasonably wet weather, especially compared to last July’s heatwave.

“Although IGD’s Shopper Confidence Index increased for the fourth month running, confidence remains low. Shoppers are feeling less pessimistic about their personal finances, but they aren’t yet feeling optimistic; fewer people are experiencing rising energy bills (51% compared to 68% in Jul’22) and fewer shoppers expect to be financially worse off in the year ahead (37% compared to 50% in Jul ’22). Furthermore, fewer shoppers are concerned about food price rises with 68% expecting them to get more expensive in the next 12 months compared to 89% last July.”