MNI REALITY CHECK: UK Aug Sales Could Miss Modest Expectations

By Laurie Laird

(MNI) London - UK August retail sales could fall short of already-modest expectations, with consumers able to expand spending on services last month -- not least, in the form of staycations – with further bottlenecks reducing the already tight supply of a range of goods.

Food sales are the biggest wildcard in forecasting the August outcome, with industry leaders noting a slowing in annual growth, as consumers return to pubs and restaurants following months of imposed home cooking.

Wet weather may have also dented demand for barbecue and snack foods. However, supermarket sales fell by 1.5% between June and July, providing for a low base from which to measure August growth.

'We are already tracking signs of fatigue when it comes to home cooking … More people returning to towns and cities should also provide a boost for cafes and coffee shops," said Kantar's Fraser McKevitt.

STAYCATIONS HELP

But despite the slowdown there were some signs that holidays at home had helped food retailers, with IGD CEO Susan Barratt noting sales were "supported by staycations and the late summer bank holiday, which helped push a small amount of growth."

Footfall did improve from depressed July levels to stand 18.4% below 2019 levels, up on the 24.2% shortfall recorded in July, according to Springboard. That's the first time the gap has fallen below 20% since the start of the pandemic.

But footfall didn't necessarily translate into turnover, as "sales growth on the high street continued to slow … and online sales took a retreat from the highs of last year, whilst some discretionary non-food categories continued their recovery," according to Don Williams, retail partner at KPMG.

Clothing sales did recover somewhat in August, say industry experts, with social events returning to diaries and workers contemplating a return to the office. Clothing and footwear sales fell by 2.0% between June and July, providing for an easy monthly comparison.

FOOTFALL UP, BUT LITTLE FOLLOW THROUGH

As shoppers continued to venture further from home, online sales continued to decline, falling by 4.5% between July and August, according to the internet retailing organisation IMRG, with the sector hit by supply bottlenecks, particularly for electronics and home goods. Stock levels in relation to expected sales hit a fifth-straight record low, according to the CBI.

"The conversion rate [of website visits that lead to purchases] fell to 3.3% from 4.6% in August of 2020, which suggests that people are not finding what they're after," according to Andy Mulcahy, strategy and Insight director at IMRG.

Alpesh Paleja, lead economist at the CBI said "consumer demand continues to spur economic recovery … (but) there are signs of operational challenges still biting, with stock levels reaching another record low and import penetration falling."

Analysts forecast a 0.5% rise in sales volumes between July and August, after an unexpectedly-large 2.5% decline between June and July. Annual growth is expected to rise to 2.7% from 2.5%.