Footwear is bright spot in bleak March says BRC, inflation still rising

By

Sandra Halliday

Published
Apr 11, 2017

There was some good news for footwear stores on Tuesday as shoe sales were a bright spot in an otherwise bleak March retail sales report. That must have cheered retailers at a time when two major UK shoe chains have gone under, but non-food sales generally still lagged other sectors, the latest British Retail Consortium-KPMG figures showed.

UK retail sales fell by 1% on a comparable basis in March and the debate about whether that bad news was caused by the late timing of Easter continued. Not that we will have a definite answer until April’s figures are in too. But for now, the picture appears to be getting bleaker with total sales last month also down, by 0.2%.

And over the three months to March, non-food sales fell 1.1% on a comps basis and 0.8% in total. This was the slowest three-month total average growth since May 2011, and dragged the 12-month total average growth to 0.3%, the lowest since April 2012.
        
Over the three-months to March, Online sales of non-food products grew 7.4% but In-store sales declined 3% on a total basis and 3.4% on a comps basis.

So what did the BRC’s chief executive Helen Dickinson make of it? “First impressions of March’s sales figures are underwhelming, with the first decline since August last year,” she said.

But while she believes Easter was distorting the figures, she highlighted Mother’s Day gift purchases as providing some compensation, boosting sales of beauty, jewellery and stationery items in particular. “Looking at the bigger picture though, the slowdown in non-food growth persists and it now stands at its lowest three-month average for nearly six years,” she added.

With food sales outperforming, it looks like much consumer discretionary spend was shifted to this category. Whether that was out of choice or necessity is unclear so far. We know that shoppers are increasingly favouring experiences over ‘stuff’, which benefits the food sector. But we also know that higher inflation means daily necessities are growing more expensive.

Paul Martin, UK head of retail at KPMG, thinks inflation is the main cause. He said: “Food sales remained in the black for a full quarter, although this is largely being driven by rising inflation, so no reason for too much celebration.”

He aded: “Retailers will be hoping Easter boosts retail sales in April, whether it’s shoppers making the most of the holiday or those choosing to spruce up their homes. The new tax year marks further pressure on margins in the form of the apprenticeship levy and business rate changes, therefore tighter cost management and a focus on efficiency is more important than ever.”

At the same time as the BRC-KPMG released their figures, The Office for National Statistics (ONS) released the latest inflation numbers and these showed inflation as measured by the Consumer Prices Index remained at 2.3%. At least this was not an acceleration on the figure in February but it was still significantly higher than a year ago.

The weaker pound since the Brexit vote has pushed up import costs and caused many retailers to pass some of these higher costs on to consumers. But recent data has also shown a deflationary effect in some parts of the fashion sector, suggesting that prices rises are turn-offs for shoppers and goods are staying on the rails until retailers resort to markdowns to shift them.