Mixed picture for retailers as consumer unease is evident
The picture across the retail sector remains mixed so I thought I would take a look at a couple of pieces of recent research and commentary this week which provide insight into how both consumers and retailers are feeling right now.
The latest BRC-KPMG Retail Sales Monitor (RSM) found that UK retail sales values fell 2.3% like-for-like in April and declined 0.2% on a total basis compared with April 2009 which, at first sight, comes as a bit of blow after a couple of months of stronger figures.
However, last month’s figures were deflated by the timing of Easter as the majority of spending fell into March and only Easter Sunday and Monday counted within April’s RSM this year, making year-on-year comparisons difficult.
But even taking into account the comparatives, the general malaise of the consumer seemed evident last month, with essentials and replacements favoured over discretionary purchases. And this looks likely to remain, for a while at least, given the uncertain economic environment.
The picture across different sectors remained mixed with the RSM showing that food and home-related goods were hit hard by the distorting effects of Easter, while women’s clothing and footwear picked up after a challenging March due to the good weather earlier in the month which boosted spring and summer ranges for some retailers.
In the meantime, retailers are working hard to manage their costs and margins to stay competitive while demand remains so volatile.
This was highlighted by the KPMG/Synovate Retail Think Tank (RTT) which revealed how retailers are contending with the three key drivers of retail health - costs, margins and demand – in the latest Retail Health Index (RHI) following the RTT’s latest quarterly sitting
The RHI reported that the state of retail health in quarter one improved for the second quarter in a row, with retailers on the whole navigating their way successfully through the wintry weather, the VAT rise and the economic uncertainties at the start of the year, meaning the RHI edged upwards by one point to 85.
This positive trend is expected to continue throughout the current quarter, reflected by a forecast of a one point rise in the RHI to 86, as stronger demand becomes be the key driver of improved health while the effects of both costs and margins are expected to be neutral. But the longer term looks less certain, with tough decisions on the public deficit required – and the effect this will have on the economy and consumer confidence – so the second half of the year remains a cause of concern to the RTT.
With the new coalition Government’s budget scheduled for 22nd June, this will be viewed with interest by all those in the sector: it seems like there’s no let up in the sector’s mixed fortunes just yet.
Helen Dickinson is Head of Retail at KPMG
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