Overall retail sales were flat in the year to March, but this masked a sharp divergence between sectors, according to results from the latest CBI Distributive Trends Survey.
In the survey conducted between 26 February and 13 March, grocers said they saw exceptionally strong growth in sales volumes in the year to March, as did specialist food and drink firms. However, most other sectors reported sharp falls in sales volumes, including clothing, furniture and other goods such as flowers, jewellery, and cards.
The results of the survey suggest that while households are stockpiling groceries in response to the spread of the coronavirus and the introduction of social distancing, they are putting off purchases of non-essential items. In line with this, non-store retailers reported a fall in sales volumes, while internet sales growth slowed to a below-average pace.
Looking ahead, retail sales volumes are expected to fall sharply in the year to April, with retailers more pessimistic than at any time since April 2009. This reflects a continued fall in volumes across most sectors, with grocers expecting sales to be stable over the year.
Orders placed upon suppliers fell for the eleventh consecutive month, despite a strong rise in orders placed by grocers. Orders are expected to fall across most sectors in the year to April (including grocers), with expectations the weakest since April 2009.
Sales were seen as poor for the time of year, but to a lesser extent than last month. Next month, sales are expected to be poor for the time of year – to the greatest extent since February 2009.
Ben Jones, CBI Principal Economist, commented: “These are extraordinary times for the retail sector. Grocers are seeing a temporary increase in demand because of coronavirus. But many other retailers are seriously suffering as households put off non-essential purchases and social distancing keeps people away from the High Street.
“The Government and Bank of England have already taken welcome, substantial steps to support business during this unprecedented period. What’s needed now is clarity over the support available to firms and fast action to ensure measures announced last week are accessible to businesses of all sizes.”
Meanwhile, official retail sales data from before the coronavirus outbreak fully struck the UK shows the sector had already been struggling amid the poor weather.
The Office for National Statistics (ONS) said sales volumes in February were flat on a year-on-year basis and had fallen 0.3% compared to the previous month. On a three month basis, volumes slipped 0.6%.
“Retail sales continued to decline in the latest three months due to weak sales across most store types, with February’s bad weather and flooding impacting on footfall,” said ONS head of retail sales Rhian Murphy.
“A small number of retailers also said that the impact of the coronavirus had affected sales of goods shipped from China.”
Richard Lim, CEO, Retail Economics highlighted that department stores were particularly affected, seeing the largest declines, while food retailers saw modest growth.
He added: “Non-food retailers will be looking back at February’s figures with glee compared with the unprecedented pressure they are currently enduring because of the impact of the coronavirus. With all non-essential physical retail now shut, most of the industry is in survival mode as companies pivot towards cash, desperately cut costs and prepare to weather the storm.
“Over the next few months, the retail survivors will be those that are positioned to weather the storm the longest. Companies that have the deepest pockets, slick online operations and are aligned to needs, rather than wants, are best positioned. Those that are saddled with high levels of debt and weaker balance sheets will fall first. And this is likely to happen quickly.
According to figures from the Centre for Retail Research, more than 20,000 stores could be lost by the end of the year, a huge leap on the 4,547 that closed in 2019.
NAM Implications:
- We are in the midst of a radical re-set: Social, economic supply and retail.
- Key will be the ability to adjust (mean do something about: Seth Godin) to the new normal…
- Without wasting time hankering after the ‘old days’ i.e. pre coronavirus…
