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MNI REALITY CHECK: UK August Retail Sales May Come Up Short

LONDON (MNI)

UK retail sales could spring a late-summer downside surprise, and fall short of City expectations, with industry leaders reporting sluggish sales in August following a rebound in June and July that lifted sales volumes above pre-pandemic levels.

Executives across a wide range of retailers continue to report a sharp decline in footfall, particularly in city centres, with consumers still edgy about venturing into public spaces.

City economists forecast a meagre 0.7% gain in August, a sharp deceleration from the 3.6% increase in July and near-14% surge in June, although seen 1.4% over August 2019 levels.

Grocery sales have continued to slow, but remain above-pre-pandemic levels and alcohol sales remain elevated when compared with 2019 levels, but the year-on-year gain moderated significantly in August.

Retailers across the spectrum reported a 25-30% plunge in footfall, with customer numbers less depressed in out-of-town retail parks. That suggests that consumers remain extremely wary of venturing on to crowded urban high streets.

The Covid-related surge in internet sales has begun to retreat. Sales rose by 43.5% in August, a slower pace than in recent months, according to the internet retailing organization IMRG. Online sales actually shrunk month-on-month for the for time since the emergence of the pandemic.

DIFFICULT TIME

"We've just come out of a difficult summer and the subliminal message [from government] is that the virus is still about. There's a sense amongst shoppers 'that I'll probably stay in' … Rents are due this month, and 20% of independent [retailers] couldn't pay rents in the second quarter. Landlords can evict a commercial tenant quite easily," Andrew Goodacre, Chief Executive at the Independent Retailers' Association said, highlighting how tough conditions remain on the high street.

"Trading conditions for the retail sector remain tough, even against the backdrop of business slowly returning. Firms will be wary of deteriorating household incomes and that risk of further local lockdowns potentially hitting them in the pocked for a second time," said Alpesh Paleja, lead economist at the CBI.

"The number of supermarket trips was two million lower than expected, and currently, just over half of shoppers say they feel safe in stores. That suggests the public may need time to adjust to the new regulations" such as wearing face coverings in shops, Charlotte Scott at Kantar said.

MIXED EXPERIENCE

Its not a one-size-fits all day out, with shoppers having varying experiences.

Confidence is more subdued among lower socio-economic groups and younger shoppers, with these consumers traditionally impacted more during an economic downturn, according to Susan Barrat, CEO at IGD, the retail consultancy group.

Retailers are struggling to pull many shoppers back and city centre stores are continuing to have a hard time.

"Many retailers are continuing to struggle, particularly those in clothing, footwear and beauty, that are reliant on high footfall locations. Unless businesses and governments can successfully persuade office workers back into city and town centres, some high street retails will be unable to afford their fixed costs," said Helen Dickinson, CEO at the British Retail Consortium, the industry lobby group.

"We continue to experience mixed fortunes and not all retailers are where they should be at this point in the year. Fashion sales did start to rebound somewhat … [and] the focus on home-related products, including furniture and computing equipment continued — no doubt aided by many consumers remaining mostly at home," Paul Martin, UK head of retailing at accountants KPMG said,

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