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MNI REALITY CHECK: Bottlenecks Weigh On UK June Retail Sales

(MNI) London

UK retailers faced dual hurdle of returning hospitality sector and ongoing supply issues in June.

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UK retail sales failed to recover significantly from the unexpectedly-weak decline in May, with many retailers unable to fulfil demand -- particularly for electronics and homewares -- as supply bottlenecks reduced imports into the UK, industry insiders told MNI.

A lack of supply limited sales volumes growth, according to retailing executives, although sales values are likely to have increased in June as stock reductions resulting from shipping bottlenecks meant retailers had no need to implement discounting to shift goods.

"We're seeing a lot of supply problems and [a lack of] availability of pallets and containers. Many retailers are being quoted ten times the normal rate to get stuff shipped … that's meant that retailers have been less reliant on discounting," Andy Mulcahy, Strategy an Insight director at internet retailing association IMRG said.

Household goods sales continue to outperform -- extending the 9.0% surge between May and June -- although industry leaders say demand for homewares far exceeded supply.

"Home and garden (sales) continued to grow and would have grown more quickly were it not for a shortage of supply, particularly in garden furniture," Andrew Goodacre, head of the Independent Retailers' Association noted.

ONLINE SALES SLOW

Ben Jones, CBI's Principle Economist, also noted the supply constraints holding back sales. "The return of demand is patchy, with inner-city footfall still wet down. The outlook is also clouded somewhat by supply pressures, with stocks seen as too low compared with expected sales," he said.

The reduced sales also contributed to a near 5% decline in internet sales between May and June, according to IMRG, even as the value of the average online shopping basket rose by more than 60% over June 2020.

Clothing and footwear sales rebounded from a 2.5% fall in May, with shoppers looking forward to the return of events such as weddings and festivals, ahead of the reopening of the economy on 19 July. Retailers report some unleashing of pent-up demand, with the average spend per head remaining well above levels of two years ago, although in part due to reduced discounting in June.

"Fashion and footwear did well while the sun was out in the first half of June, while the start of Euro 2020 provided a boost for TVs, snack food and beer," the British Retail Consortium's CEO Helen Dickinson said.

EUROS PUBS BOOST

Food sales recovered, but the record-high 5.7% May plunge makes for an easy monthly comparison. Adult beverages and snack food were in demand as the delayed Eur0 2020 football championships finally got underway on 11 June. However, gains were capped by the full reopening of hospitality in late May, with more consumers indulging in food and drink away from home.

"A hot late May bank holiday this year had shoppers celebrating …. Despite pubs and restaurants being open, take-home sales of alcohol rose compared to May in part thanks to events including the bank holiday, with another peak coming in the lead up to the much-anticipated European football championships," Fraser McKevitt at Kantar said, although referencing the 4 weeks to mid-month.

Susan Barrat, CEO at IGD underlined the sector's resilience, saying "comparisons to 2020 remain challenging thanks to the impact of last year's lockdown, but sales are still significantly elevated against 2019 levels."

Paul Williams, head of retail at consultants KPMG summed up the sector's dilemma, saying "the fight for share of wallet is underway, as consumers unleash pent up demand for social activities as restrictions in the UK continue to unwind."

City analysts predict a 0.1% decline in sales volumes between May and June, a modest improvement on the 1.4% decline in May.