The sun put its hat on in May, consumers went out to play, and retailers said hip hip, hooray.
March and April saw the worst year-on-year performance since 2005, said the British Retail Consortium (BRC) this morning, but, in May, UK retail sales values rose 1.9 per cent on a like-for-like basis, compared with May 2007, when sales were up 1.8 per cent.
BRC said: “Some warm sunny days this May compared with very wet weather last May boosted sales growth,” and “food sales strengthened, with clothing seeing year-on-year growth after several months of declines.”
But alas, it wasn’t all good news. “Underlying trade remained tough, with widespread discounting,” and “furniture and larger homewares remained well down on a year ago, despite continued discounts and promotions,” said BRC.
Stephen Robertson, Director General, British Retail Consortium, said: “After several mostly miserable months, warm sunny weather finally arrived in early May and helped lift customers’ gloom. Significantly clothing sales saw year-on-year growth for the first time since last August, while sales of footwear, outdoor leisure and gardening goods also rose. But we are not out of the woods yet. The economic fundamentals remain weak. BRC/Nielsen consumer confidence figures show the economy is the major concern for a third of people. The housing slowdown and tighter household budgets meant that, despite heavy discounting, furniture sales were well down on a year ago and there was a continued slowdown for electrical goods.”
Frankly, with house prices in such disarray, it is a miracle that the High Street is bearing up so well. Some will say this provides more evidence that consumer spending is not influenced by house prices. But the truth is, the relationship is complex and time lags are involved. People are complicated, and just because a few months of bad news do not lead to the populace rushing for tranquilisers, it does not mean there is no link between consumer spending and house prices.
Mind you, the latest news from Alliance Boots would suggest that actually the High Street is in rude health – not that a pharmacy retailer wants us to be in rude health – presumably, it wants us to get a touch of hay fever or some other ailment.
Alliance Boots is owned by private equity these days, and as such is not obliged to tell us anything. But this morning, it did anyway.
Like-for-like sales rose 1.9 per cent over the last year, revenue jumped by 4.8 per cent and profits soared 20 per cent.
A year ago, it was bought out by ’barbarians at the gate’ Kohlberg Kravis Roberts. Its chairman Stefano Pessina comes from the Alliance side of the family. You may recall before the private equity buyout, he was less than flattering about the City, and grew increasingly frustrated by what he considered the City’s short-termist outlook.
When Boots and Alliance UniChem merged, the city gave the whole idea a slating. At the time, for example, Philip Dorgan, an analyst at brokers Panmure Gordon, was quoted in the Telegraph as saying : “This is an absolutely terrible deal. It doesn’t make sense. Boots needs another 900 shops like a hole in the head. The most important thing is for Boots to sort out its own shops.”
Yesterday, Mr Pessina talked about cost savings as the two parts, Alliance and Boots, are merged. Maybe he was keen to get one over the City he has such low regard for, and this explains why Boots went against the normal private equity way of doing things, and revealed the figures.
This does of course mean it is hard to tell whether the Boots results are evidence that the High Street is still strong, or merely point to a successful merger.
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