August 06 Retail News
Retail Sales for August 2006 grew 2.5% compared to August 2005 when sales dropped 1% in the wake of the London bombings.
The three month trend of growth fell to 2.7% from 4.1% in July for like-for-like sales and to 5.4% from 5.6% for total sales, reflecting the continued growth of retail space.
The volume of retail sales in the three months from June to August was 1.5% higher than in the previous three months. This follows 1.9% growth in the three months to July and compares with an increase of 0.8% at the same time in 2005.
Following the interest rate rise, consumers were pessimistic about economic prospects and plans for major purchases, sales of larger items were still often discount driven.
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For the three months to August 06 the unadjusted value of retail sales was 3.7% higher than in the same period a year earlier. The average weekly value of sales in August was £4.7 billion, 4.2% higher than in August 2005.
Kevin Hawkins, Director General, British Retail Consortium comments “While the modest recovery in some non-food product categories is obviously welcome, the comparatives with August 2005 are very weak and price competition is as keen as ever. Any suggestion that we are seeing a significant and sustainable return to the sort of sales growth we were reporting two or three years ago is simply not supported by the evidence. The recent increase in interest rates has yet to work through to consumer spending or the housing market. The outlook for the next few months is therefore very uncertain.”
Helen Dickinson, Head of Retail, KPMG added “For the first time this year, the results for the month were not primarily driven by sales of food and drink. The cooler and wetter weather took us back to the shops seeking a wider assortment of purchases with both clothing and home related sectors doing better. However, the consistent theme of heavy discounting to drive sales remains and hence its resultant impact on profitability continues unabated. The strength of the 2005 comparatives continues to increase as we enter the most critical trading period of the year, thereby raising doubts about whether the growth rates we are currently seeing are sustainable.”
Sector Performance
Food and Drink
Following July’s growth, sales saw a significant drop. As the weather cooled demand shifted from salads, chilled fruits and ice-creams to soups, roasting meets and vegetables.
Clothing
After the growth seen in July, sales slowed as the cooler weather arrived and clearance sales came to an end. The slowdown was confined to womenswear where growth fell back following July’s peak. Menswear sales strengthened a little and sales of childrenswear picked up after two months of decline.
Footwear
Growth was the best since late 2004 although the gain was against substantial declines last August following the knock on affect of the London Bombings.
Electrical and Electronic
Overall sales showed little underlying change from the trend of the past few months. Sales of white goods were mixed with growth in certain areas often being helped by promotions and discounts.
Department Stores
Cooler weather saw footfall increase and in store restaurants benefited.
DIY/ Gardening
The cooler weather helped turn customers minds to indoor projects as wall coverings, interior paints and tilling products sold well.
Homeware
Home accessories had a better month as people returned to “indoor” products after buying “outdoor” items during the July heatwave.
Furniture and Carpets
The new autumn range helped boost sales following July’s sluggish growth. Sales on larger items remained mostly discount driven.
Chemist and Beauty
Despite growth in some premium beauty ranges, toiletries and cosmetics slowed overall amid strong competition across stores. The cooler weather hit suncare and hayfever products.
Leisure Goods
Home entertainments were mixed with growth in DVD and video games but music generally flat compared with a year ago. For both DVD and music albums, growth was driven by backlist titles, often with multibuys or discounts, as there were no big releases.
