Sales growth slows as price hikes loom

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

Covering the four weeks 31 July – 27 August 2022

• On a Total basis, sales increased by 1.0% in August, against an increase of 3.0% in August 2021. This is above the 3-month average of 0.7% and below the 12-month average growth of 2.5%.
• UK retail sales increased 0.5% on a Like-for-like basis from August 2021, when they had increased 1.5%. This was above the 3-month average growth of 0.1% and below the 12-month average growth of 0.7%.
• Over the three months to August, Food sales increased 3.8% on a Total basis and 3.3% on a Like-for-like basis. This is above the 12-month Total average growth of 0.8%. For the month of August, Food was in growth year-on-year.
• Over the three-months to August, Non-Food retail sales decreased by 2.0% on a Total basis and 2.6% on a like-for-like basis. This is below the 12-month Total average growth of 4.0%. For the month of August, Non-Food was in decline year-on-year.
• Over the three months to August, In-Store sales of Non-Food items increased 1.4% on a Total basis and 0.3% on a Like-for-like basis since August 2021. This is below the 12-month growth of 33.7%.
• Online Non-Food sales decreased by 6.1% in August, against a decline of 4.6% in August 2021. This is above the 3-month average decline of 6.6% and the 12-month decline of 14.2%.

 The Non-Food Online penetration rate decreased to 38.5% in August from 40.2% at the same point last year.

Helen Dickinson OBE, chief executive | British Retail Consortium “Retail sales growth slowed in August compared to the previous month as consumers reined in spending amidst the spiralling cost-of-living. While inflation in retail prices is lower than general inflation at over 10%, this still represents a significant drop in sales volumes. For the first time in recent months, clothing sales were sluggish as summer events ended, and parents held back on back-to-school spending. White goods and homeware remained hardest hit, but products such as air fryers and knitwear did get a boost as thrifty consumers prepare for soaring energy bills.”

“With some predictions of inflation reaching 20% in the new year, households and retailers are preparing for a particularly tough time ahead. As retailers face into their own rising costs from all directions, they continue to do all they can to protect customers from price rises. The new Prime Minister could help relieve some of the cost burden, and ease the upwards pressure on prices, by freezing the business rates multiplier for all retail businesses next year. Without this, inflation could whack an additional £800 million onto retailers’ rates bills, which will inevitably lead to even higher prices for households at a time when people’s income is under unprecedented pressure.”

Don Williams, retail partner | KPM: “The warm weather combined with rising prices, saw August sales growth rise by 1% year on year, although volumes will have been challenged.

“The heatwave saw strong growth for health items such as suntan lotion, whilst food and drink sales for summer barbeques grew by 5% year on year and home accessories also saw growth for the first time in months.  Online sales dipped by over 6% in August, however the locked-in step-up of online penetration remains.

“Worryingly, August data revealed a significant fall in clothing sales – the category which has been the most robust performer this year which could signal the start of shoppers pulling back from non-essential spending.

“As consumers return from summer holidays to an 80% increase in the energy price cap, double digit inflation and Christmas just 3 pay cheques away, the brakes could be firmly applied on non-essential spending for most UK households.  The storm clouds are closing in as retailers brace themselves for a fall in demand – at a time when their own margins are under pressure from rising costs. Supporting customers through these difficult times will be paramount for the health of the sector as we move through the rest of this year. Doing this will require a more granular understanding of current and future customers, continual review of the cost base and focus on how to drive productivity, especially using more effective technology. It is in these areas that opportunity lies even in a challenging trading environment.”

Food & Drink sector performance | Susan Barratt, CEO | IGD “Food and drink sales volumes spent the entire month of August in negative territory, with value sales propped up by the ongoing inflationary pressures that are being steadily fed through the supply chain. IGD’s latest Shopper Confidence Index data shows another record-breaking low, down six points from July. Confidence has been steadily declining over recent months, but now we can really see that people are worried about their personal finances.

“August has been dominated by increasing inflation, with talks of this going even higher, along with energy price increases. People are reacting – taking action now to try and get ahead. Our data shows that shoppers are investing more time in how they can save money by planning more and searching for value with private label options and seeking out discounts.”