August sales hold up, but ‘challenges lurk’ for retailers

Non-food retail sales picked up in August, returning to growth, but only just reaching levels seen two years ago.

The BRC-KPMG Retail Sales Monitor showed that UK retail sales in August increased by 1.3 per cent on a like-for-like basis from August 2016, when they had decreased 0.9 per cent from the previous year.

On a total basis, sales rose by 2.4 per cent in August, compared with a decline of 0.3 per cent in the same month a year earlier. This was the strongest growth since Easter this year.

In the three months to August, non-food sales increased by 0.6 per cent on a like-for-like basis and 0.9 per cent on a total basis.

Meanwhile, online sales of non-food products grew by 11 per cent, with the online penetration rate increasing from 21 per cent in August 2016 to 21.6 per cent in August 2017.

British Retail Consortium chief executive Helen Dickinson said: “August provided a welcome pick-up in retail sales across channels, with non-food returning to growth as shoppers’ attentions turned to homewares, autumn clothing ranges and the new school term.

“However, these figures tell a less positive story about the health of consumer spending than it might seem at first glance. Non-food sales have only just recovered to levels seen two years ago, after a dismal August in 2016; while strong figures for food are largely the result of rising prices, leaving growth in volume terms weaker than last year.

“Stark challenges lurk around the corner for the retail industry. Purchasing decisions are very much dictated by a shrinking pool of discretionary consumer spend, with the amount of money in people’s pockets set to be dented by inflation and statutory rises in employee pension contributions in a few months’ time. It’s therefore crucial to protect consumers, wherever possible, from further cost pressures. For Government, this includes ensuring continued choice and availability of affordable, quality products for shoppers post-Brexit, by securing a strong deal on customs and tariff-free trade with the EU.”

Don Williams, retail partner at KPMG, commented: “Despite the ongoing challenges for the industry, retailers achieved reasonable growth in August, which is positive news for the industry. Even non-food categories experienced an uptick – a welcome relief given the poor performance recently.

“Growth in home improvement sales – including furniture – point to the influence of ‘staycations’, although it could also be that home furnishing retailers are not having to compete with the likes of the Olympics for attention this year.

“Mirroring the successes of the high street, online sales continued to go from strength to strength, with all categories noting growth.

“Retailers have managed to achieve stronger than expected growth, however adding to this could be the fact that consumers appear to be turning a blind eye to the potential crush on spending power to come. The industry now needs to overcome further devaluation of the pound and the increased costs therein.”