Damp July brings story of two halves for retail gross sales

Following a sustained run of poor like-for-like (LFL) retail gross sales development throughout the final 12 months, July has seen a small improve in gross sales, in accordance with new knowledge from accountancy and enterprise advisory agency, BDO LLP.

Based on BDO’s newest Excessive Road Gross sales Tracker, whole like-for-like gross sales in July grew +3.6%, in comparison with July 2022. In-store LFL gross sales grew by +6.3% and non-store gross sales by +4.5%, based mostly on the identical interval final 12 months. Nonetheless, within the last two weeks of the month gross sales declined considerably, recording falls of -0.55% and -0.42% respectively in comparison with the identical weeks final 12 months.

Sophie Michael, Head of Retail and Wholesale at BDO LLP, mentioned: “Though these figures spotlight a small improve in gross sales in July, this actually has been a month of two halves. The expansion within the first half of the month was nonetheless beneath inflation charges, that means gross sales volumes are nonetheless considerably down. The second half of the month noticed gross sales going backwards, declining in comparison with final 12 months.

“The primary couple of weeks of July noticed increased ranges of discretionary spending, inspired by some heavy discounting within the trend sector and shoppers making buying forward of the faculties breaking apart for summer time, however gross sales within the latter half of the month had been seemingly dampened by extra folks travelling on vacation and the unseasonably moist climate.”

Sector outcomes

Following a number of months of unhealthy outcomes, the homewares sector continued to carry out poorly in July, recording simply +0.9% LFL gross sales development from a really low base of -6.0%.

Nonetheless, the style sector recorded modest development, with LFL gross sales growing by +3.0% over the identical month final 12 months. In-store trend LFLs fell by -0.3%, dragged down by detrimental gross sales in weeks three and 4 of the month.

The life-style sector was the strongest performing class, with whole LFLs rising by +7.1% this month from a base of +11.6%. Possible prompted by vacation spending, in-store life-style gross sales had been sturdy all through July, attaining a few of the sector’s strongest development since March.

Sophie continued, “Retailers proceed to face difficult buying and selling circumstances with no indicators of a direct restoration. Having recorded poor gross sales development within the last two weeks of July, retailers now head into August, when UK discretionary spending sometimes slows down.

“Nonetheless, with knowledge displaying that the variety of abroad vacationers is now above pre-pandemic ranges, this will likely supply a lifeline to retailers, notably these in main cities who might be counting on them to make up the discretionary spending shortfall. With many retailers calling on the federal government to reinstate tax-free looking for abroad guests, this might be a method of offering a major enhance to the sector.”

“Nonetheless, even when vacationer spending boosts gross sales development and volumes within the quick time period, retailers are actually gearing up for his or her vital fourth quarter buying and selling interval. They’ve discounted closely over the summer time to help gross sales, which is placing enormous strain on their margins, however that is unsustainable.

“Navigating a interval of excessive rates of interest and excessive inflation whereas sustaining gross sales might be extremely difficult. Now greater than ever will retailers have to concentrate on correct forecasting and managing their working capital and product providing in an effort to succeed.”