17 Jan 2020

Festive sales prove uncomfortably tight for retailers

Britain’s high streets ended the year with a whimper, leaving many retailers looking to the government’s Budget for some help with business rates.

The key findings from the Office for National Statistics showed:

  • In the three months to December 2019, the quantity bought in retail sales decreased by 1.0% when compared with the previous three months.
  • All sectors except household goods stores and fuel saw a decline in the quantity bought for the three-month on three-month movement; driven mainly by non-food stores at negative 1.0%.
  • The quantity bought in December 2019 fell by 0.6% when compared with the previous month; the fifth consecutive month of no growth.
  • The quantity bought in food stores fell by 1.3% for the monthly growth rate, which was the largest fall since December 2016, also at 1.3%.
  • Comparing the three months to December 2019 against the same three months a year ago, growth in the quantity bought increased by 1.6% in December 2019, despite a strong decline of 2.2% for department stores.
  • Online sales as a proportion of all retailing was 19.0% in December 2019, compared with the 18.6% reported in November 2019.

Phil Mullis, Partner and Head of Retail and Wholesale at one of the UK’s leading business advisory firms, Wilkins Kennedy part of CogitalGroup, said: “The three month-on-three month decline in both volume and value of sales is disappointing, and these results emphasise the urgent need that retailers require help from the government at March’s budget.

“When you combine these findings with recent BRC figures showing the first overall decline in retail sales for 25 years, it’s clear that retailers are operating in a volatile trading environment where they need some help to get them by until the dust has settled on Brexit and consumer confidence has returned.

“Business rate relief will go some way towards giving some retailers some breathing space so that they can either put some cash to one side to improve cash flow or into a contingency fund, or investing into other areas that will enable them to stand out from the crowd.

“Company Voluntary Arrangements have saved numerous retailers from going under in the past, often to the detriment of landlords, who are now digging their heels in and becoming more reluctant to go down this route – and as a result we will probably see more administrations and liquidations.

“Unfortunately I do think the high street is going to get worse until it can get better until we are left with those retailers who have a clear differentiation and know the demographic they are going to target – a high street that is full of panic and heavy discounting like we saw at the back end of last year just does not work in the long-term.

“One part of the market I wouldn’t be surprised to see re-emerge over the coming years is the hiring market. This is currently done in the higher end of the fashion industry, and given people’s concerns about waste and the planet, is something I feel could end up blending into the middle part of the fashion market too.

“Ultimately though I think we will need another year of the dust to settle from Brexit until we really start to see shoots of growth across the high street.”

Wilkins Kennedy is part of the CogitalGroup, an international business services group focused on entrepreneurial and private companies.

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