Retail sales in July narrowly missed falling into negative territory but only through widespread discounting which inevitably will hit margin and retailers’ profits, according to figures released today by BDO.
Despite stores’ attempts to lure in shoppers with extended sales that offered discounts as high as 70%, BDO’s monthly High Street Sales Tracker (HSST) recorded no growth (0%) in overall year-on-year sales for July. The figures confirm a sixth successive month without growth for Britain’s embattled retailers.
Sales of fashion goods for the month were down -1% compared to July 2015. Following one of the wettest Junes on record, stores were forced to sacrifice margins in a bid to increase sales volumes and clear warehouses piled high with summer stock. Homewares sales grew by 4.7% and sales of lifestyle goods crept up by 1% – the sector’s strongest performance in four months.
Non-store sales rose by 21.7%, the strongest performance in 2016 so far, and the sector’s best performance since September 2015. In stark contrast to bricks and mortar sales, some fashion retailers reported double – or even triple – online growth in July, and a high proportion of homewares and lifestyle retailers also saw strong online sales growth, again achieved through deeper discounts and promotions being offered online.
Sophie Michael, Head of Retail and Wholesale at BDO LLP, said retailers would need to focus on their margins now the discounting period had finished. “Inflation is low, as is unemployment, but so is consumer confidence,” she said. “Stores are finding it really difficult to get people to spend unless they feel they’re getting a bargain, which is why we’re even seeing discounts on new lines.”
She added: “The challenge for stores over the next couple of months will be to keep new stock on sale at full price for as long as possible. Retailers will be looking at opportunities to increase margins in the post-referendum marketplace, such as possible changes to their supply chains and sourcing models and exploring the export market.
“But such changes to their businesses take time to assess and implement, particularly when there are still so many uncertainties ahead. It is important that businesses stay flexible and vigilant to enable them to deal with challenges but also grasp opportunities that will arise in these changing times.”