Retail sales growth slows as pent-up demand eases  

Retail sales increased 1.5 per cent on a like-for-like basis from August 2020, when they had increased 4.7 per cent from the preceding year, showed the latest figures from the BRC. This is below the 3-month average growth of 6.9 per cent and the 12-month average growth of 10.3 per cent.

On a total basis, sales increased by 3 per cent in August, against a growth of 3.9 per cent in the same month last year, which is below the 3-month average growth of 6.9 per cent and the 12-month average growth of 10.3 per cent, according to the BRC-KPMG Retail Sales Monitor.

However, on a two-year basis, total retail sales grew 8.9 per cent during August compared with the same month in 2019.

“As post-lockdown pent-up demand has softened, the growth in retail sales we have seen over the past few months slowed for August. Nonetheless, we still saw growth above pre-pandemic levels, as people returned to stores in greater numbers,” commented Helen Dickinson, chief executive of British Retail Consortium.

Whilst food was in growth year-on-year for the month of August, sales growth for the three months to August, increase of 2.9 per cent on a total basis, is below the 12-month total average growth of 5.4 per cent. On a like-for-like basis sales increased 1.9 per cent during the three-month period.

Commenting on the food and drink sector performance, Susan Barratt, chief executive of IGD, said the broadly flat sales reflected consumers switching some spending back to the out-of-home sector. “Despite sales being limited by the dull weather, they were supported by staycations and the late summer Bank Holiday, which helped sales show a small amount of growth,” she added, noting that more shoppers are now changing what they spend their money on.

“Some 73 per cent have spent more on products and services in August, compared to 69 per cent in June’21 and 31 per cent are spending more on eating and drinking out, compared to 22 per cent in June’21,” she said.

Retailers reported a strong performance in clothing, with increasing demand for formalwear, driven by the return to office working and social events.

Over the three months to August, in-store sales of non-food items grew 23.7 per cent on a total basis. This was slightly above the 12-month average growth of 21.7 per cent. On a 2-year basis, stores saw a decline of 3.5 per cent over the last three months.

Non-food retail sales increased 10.3 per cent on a total basis and 6.8 per cent on a like-for-like basis during the three months. This is below the 12-month Total average growth of 14.4 per cent, but on a two-year basis, non-food sales saw growth of 11.9 per cent for the three-months to August.

Online non-food sales decreased by 4.6 per cent in August, against a growth of 42.4 per cent in August 2020. The penetration rate also decreased to 38.3 per cent this August from 42 per cent in the same month last year. Whilst down on last year, it was up 9.3 percentage points on the 29 per cent seen at the same point in 2019.

“While the online sales growth has begun to slow, it is still high when compared with pre-pandemic growth rates. This demonstrates how the pandemic has shifted the digital-physical shopping balance and increased the linkage between the two channels,” Dickinson noted.

Don Williams, retail partner at KPMG, added that retail performance in August was mixed with sales growth on the high street continued to slow, as footfall is still below pre-pandemic levels.

“Overall, the high street saw 3 per cent growth, dented by lower food sales growth of 1.9 per cent as consumers enjoyed a fully re-opened hospitality sector. Online sales fell back by -2.5 per cent compared to August 2020, though online penetration rates remained significantly above pre-pandemic levels, signalling the step up in online shopping is here to stay.

“Clothing, footwear and accessories continued their recovery with some healthy sales increases but from a much lower base, whilst technology and furniture/appliance categories suffered against very strong comparatives in 2020.

Williams warned against increasing challenges for retailers on a number of fronts. “Inflation is expected to accelerate putting pressure on household spending, whilst retailers battle for share of wallet as consumers spend money on leisure, entertainment and travel. Staffing pressures remain and supply chain issues are being widely reported, with raw material shortages and challenges getting product into the UK and getting goods into customers’ hands. This may feed into limited availability of certain products and the spectre of price rises remains,” he said.

Dickinson said the government needs to deliver on its promise to reduce the burden of business rates as retailers are grappling with higher costs across the supply chain.

“If not, we will see the number of shuttered stores continue to rise and more jobs lost. This will seriously impact communities right across the country, and those already most economically deprived will be hit the hardest, putting the levelling up agenda in jeopardy,” she said.

A new report on vacancy rates, published this week, has shown a net decline of 5,251 operators in the first six months of 2021, with 8,739 chain stores closed against 3,488 store openings.