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Retailers face challenges despite strong June

Jul 31
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Retailers face challenges despite strong June

Consultants working in the UK retail sector are likely to see further business challenges over the coming months and into 2018, it has been suggested, despite strong sales figures for June 2017.

Trends such as rising inflation and uncertain consumer confidence could play a big part in how the industry performs in the near future.

Warm June boosts sales figures

Office for National Statistics (ONS) data for the three months to June 2017 showed that sales volumes in the retail industry are estimated to have increased by 1.5 per cent, compared with a year earlier. Growth was recorded across all store types.

The latest rise follows a decline of 1.4 per cent in the first three months of the year.

On a month-by-month basis, the volume of goods bought by UK consumers was 0.6 per cent higher in June 2017 than in May, largely thanks to the performance of non-food stores.

Retailer feedback suggested that warmer weather and the introduction of summer fashion ranges in June helped to drive sales of clothing.

Other figures showed that online sales were up by 15.9 per cent in June compared with the previous year, and by 1.8 per cent month-on-month. Online activity accounted for just over 16 per cent of all retail spending.

ONS senior statistician Kate Davies commented: "Today's retail sales figures show overall growth. A particularly warm June seems to have prompted strong sales in clothing, which has compensated for a decline in food and fuel sales for the month."

Data from the British Retail Consortium (BRC) also provided some cause for optimism, with footfall in June up 0.8 per cent on a year earlier. High street footfall increased by 0.9 per cent, marking a significant improvement from the 3.7 per cent decline recorded in June 2016.

Warnings of volatility

Despite some of the positive retail industry data from recent months, the industry has been urged to prepare for challenges ahead.

Lisa Hooker, retail and consumer leader at PwC, said the ONS data suggests that retail sales growth can "sometimes be as volatile as the great British weather". However, she also noted that "we can take comfort from the fact that consumers aren't cutting back in certain areas".

Putting recent trends into context, Ian Geddes, head of retail at Deloitte, pointed out that inflation has dipped slightly to 2.6 per cent, the first fall recorded since October last year.

"While this may offer a glimmer of hope to consumers, many retailers will likely assume it is a blip, and will acknowledge that we have yet to reach the peak of inflation," he added.

Mr Geddes also referred to earlier Deloitte research suggesting that consumer confidence "has already been dented by cost pressures".

BRC chief executive Helen Dickinson noted that, against a backdrop of economic uncertainty and squeezed household incomes, some retailers may struggle not only to sustain growth in shopper footfall, but to convert this into sales.

She said the government can support the industry and alleviate cost pressures by "sticking to their commitment on business rates reform to deliver a system fit for purpose in the 21st century".

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Image: funstock via iStock

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