September 19, 2008 | posted by Michael Baxter in High Steet | comments (0) |

That old saying about lies, dammed lies and statistics is going to be thrown around today, as once again the ONS surprised everyone reporting that the High Street is still booming – or at least expanding.

Retail sales volume rose by 1.2 per cent between August and July said the ONS.

Apparently, monthly growth was driven by textile, clothing and footwear stores where sales rose by 4.1 per cent. Non-store retailing and the repair sector also rose by 2.4 per cent, while volume in food sales fell by 0.2 per cent.

The ONS also said: “The non-seasonally adjusted value of retail sales for the three months to August was 3.7 per cent higher than in the same period a year earlier.”

Stephen Robertson, Director General of the British Retail Consortium, said: “These unexpectedly resilient figures fail to convey how tough conditions are for customers and retailers. Plenty of retailers would be delighted if their sales values were up nearly four per cent on a year ago.

“Fundamental conditions are weakening, not improving, and recent banking industry uncertainty can only make customers more nervous about spending.

“Yes, clothing and footwear sales growth has risen but that growth is modest and driven by discounts. It cannot be called strong and cannot explain ONS’ high overall figures.”

Mr Robertson concluded: “We respect the ONS’s process but the Bank of England is right to treat these figures as only one measure of retail performance.”

Ummm, so reading between the lines, it would appear the BRC is, how could one put it tactfully ….not convinced.

Capital Economics put it this way: “These figures are still puzzlingly strong compared to the much gloomier message coming from the retail surveys, consumer confidence figures and anecdotal evidence. As such, we suspect that the MPC will treat them with a pinch of salt when considering the overall strength of the household sector.”

The trouble is, official figures do seem to be singularly poor at painting a realistic picture. It is the same with official government data on the housing market, which has only just begun to show annual falls in prices.

By contrast, more anecdotal surveys, such as consumer confidence and Purchasing Managers indices, or surveys on the housing market from the Royal Institution of Chartered Surveyors, and reports from the CBI and BRC, seem to provide information which is much closer to what one would expect.

But when making their forecasts, most economists base their figures on the official data – this could explain why economic forecasts have proven to be so wrong during this finance crisis.

September 11, 2008 | posted by Michael Baxter in High Steet | comments (0) |

Four retailers, two experiences. Profits were down at John Lewis and Next. Sales were down at Home Retail Group, the company behind Argos and Homebase, but Morrisons had a scorcher. The reasons aren’t hard to guess, but they are important all the same, and point to the form the economic recovery will take.

Last year, John Lewis seemed impervious to all the gloom. While all around retailers talked the talk of recession, John Lewis thrived. Those days are gone.

Pre-tax profits dropped 27 per cent to £108m in the six months to July on last year. Profits at Waitrose, a real superstar last year, fell 8 per cent. John Lewis blamed the poor performance in its department stores on the declining property market, saying this dented homeware sales. As for Waitrose, well, you can guess the reason for its decline – the reason is called credit crunch.

Next suffered too, with profits down 12 per cent. Simon Wolfson, the retailer’s boss said: “Next year there is very little we can see that will reduce the financial pressure on our customers…Food and energy prices continue to be well ahead of last year and our customer base is particularly exposed to higher refinancing costs of mortgages.”

The triumvirate of retailers reporting woe was completed by Home Retail Group. Like-for-likes sales at Argos were down 5.8 per cent in the 13 weeks to 30 August, while Homebase saw sales fall 8.3 per cent.

Morrisons, by contrast, is back. It seemed to take an age for it to sort out all those problems created with the purchase of Safeway, and for a number of years, bad news seemed to be all the corporate department of the retailer could manage. But, in the six months to 3 August, pre tax profits leapt by 19 per cent, and like-for-likes were up 7.6 per cent.

And what did the retailer have to say? It talked about “toughest trading environment for many years.” That must smart. While other retailers are really suffering, Morrisons says yes, things are bad, but we are doing okay. It’s like that kid at school who came out of every exam moaning how difficult it was, and then got top marks for everything.

Why is the UK number four supermarket doing so well? Morrisons said: “More shoppers are choosing Morrisons because of our price-crunching deals.”

And that really is the point. The British public, just like shoppers in the US, are reacting to the credit crunch by being more careful with their shopping. In the longer-term this will lead to reduced demand for food, and will lead to lower prices, which in turn will make us feel better off and lead to economic recovery. This is the stuff the economic cycle is made of.

Morrisons is benefiting from the same force that will form the foundations of the next boom.

September 9, 2008 | posted by Michael Baxter in High Steet | comments (0) |

Here is some news for you. Ready – well the weather wasn’t very nice in August.

In fact, the British Retail Consortium talked about: “Very wet and dull weather.”

Well, as you know, the High Street has enough problems at the moment – so the last thing it needed was that lousy weather. (Maybe retailers should put sun beds in all their stores – free ultra-violet rays, that’s what we all need – ed.)

All in all, UK retail sales values fell 1.0 per cent on a like-for-like basis from August 2007.

Food and drink was the only sector to show sales significantly up on a year ago. Clothing and footwear remained poor. Furniture and homewares were well down on a year ago, despite continued discounts and promotions. (No mention on sun lamps – ed.)

Stephen Robertson, Director General, British Retail Consortium, said: “Miserable weather washed out hopes of a summer boost for retailers, already suffering the slowdown. Annual like-for-like sales fell in five of the last six months, the first time this has happened since 2005. Even food sales growth slowed as customers focused even more on value. Footwear was the only other sector where sales rose, boosted by children’s shoe sales.

“Prospects for customers and retailers are inextricably linked. Helping retailers keep prices down by cutting regulatory costs is the best way the Government can assist hard-pressed customers. It must think again on business rate supplements and empty property rates relief and consider carefully where the minimum wage goes next.”

Helen Dickinson, Head of Retail, KPMG, said: “The only good news is that the results do not show a significant and further deterioration of the trend over the previous few months but there is no doubt August was another disappointing month for UK retail. We continue to see total UK sales and total food sales growing compared to same period last year but with like-for-like sales falls across almost all the non-food sectors. The exception was footwear where women’s and children’s footwear sales showed marginal like-for-like growth in what is a challenging environment for all. There is also a wide variation in the performance of individual retailers and across the month, as many have used tactical promotional activity to drive sales, particularly around discretionary purchases.”

August 12, 2008 | posted by Michael Baxter in High Steet | comments (0) |

Talking of inflation – or reason to think it is on the fall, pity the retailer.

The latest survey from the British Retail Consortium (BRC) was out yesterday, and it was bad. The BRC has sales down by 0.9 per cent in July from a year ago. It wasn’t the biggest rise it has reported lately, it had sales down by 1.6 per cent in March, but it does suggest that rather quirky leap in sales reported in the spring is buried now. You may recall, a couple of months ago the ONS reported the biggest rise in retail sales seen since the 1980s, and while the BRC did not record a rise in sales of that scale, it did say sales were up 1.9 per cent in May.

But while sales fall, retailers find their costs are rising too. In the year to July, the BRC had its shop price index up by 3.2 per cent. But some goods, such as electricals and clothing, are cheaper now than a year ago.

Perhaps the most telling comment comes from Mike Watkins, Senior Manager, Retailer Services, Nielsen, who said: “Latest research from Nielsen indicates that 55 per cent of people are now cutting down on their grocery spend as their other bills increase. So, while food inflation increased again in July, savings will need to be made by shopping differently to help pay for the other increases in household spend such as energy and fuel.”

And on a similar theme, Stephen Robertson, Director General, British Retail Consortium, said: “Frivolous shopping is off the agenda as most customers concentrate on value and durability and there are few signs the slowdown has yet bottomed out.”

He added: “This is a good time for consumers to take advantage of the wide range of discounts and promotions available to them.”

And in a way, that final comment is the point. Price is not determined by cost, it is determined by what customers can afford. If companies can not supply goods at a price customers can afford, they go bust.

That is the reality of the modern economy, and that is why inflation can turn to deflation.

July 30, 2008 | posted by Michael Baxter in High Steet | comments (0) |

It was around five weeks ago now, when the ONS reported the biggest monthly rise in retail sales since the 1980s. The findings of the report made no sense at all. A month on, and the ONS reported a fall in sales of a similar scale to the previous month’s rise. So the balance had been restored. But still we waited: anecdotal evidence says the High Street is suffering. But is it?

Yesterday and this morning saw three pieces of evidence emerge to suggest the High Street is now following house prices, down, down and down.

First off the block was the CBI. Sixty one per cent of respondents to its latest Distributive Trades Survey reported that sales in the first half of July were lower than a year ago, while 25 per cent said sales had increased, giving a resulting balance of -36 per cent.

And a balance of minus 36 gives the index its lowest reading ever, with records going back to 1983. Even more alarmingly all retailers in the durable household goods and furniture/carpets sectors reported falls in sales. That’s all. It just goes to show how falling house prices are already having a devastating effect on some sectors.

Andy Clarke, Chairman of the CBI Distributive Trades Panel, and Retail Director of Asda, said: “It is turning out to be a very grim summer for many retailers. Pressure from higher fuel and food prices is prompting many people to rein in their spending, proving that value retailing has never been more important.”

He added: “The faltering housing market has really depressed sales of home furnishings and white goods this month and the high street is still struggling, but supermarkets are faring better.”

Now the CBI survey suffers from one big problem. Data is only taken over a two-week period, and therefore is more prone to statistical quirks.

Even so, the three-month moving average of sales volumes, which smooths out monthly volatility, continued on the downward trend which started last summer. The balance of -20 per cent was the weakest since November 2005.

But the CBI was not alone in telling of woe. This morning, a report from Deloitte told that the first half of 2008 saw a 21 per cent rise in the number of clothing, fashion and cosmetic retailers going into administration.

Finally, there was Next.

Well, actually, the retailer had some good news. Retail sales in the second quarter were down, but only by 2.4 per cent, compared to 9.4 per cent in Q1.

But then again, Q2 of 2007 was awful for Boots – so to say sales are just 2.4 per cent down on a year ago, when a year ago they were terrible, is not much consolation.

Boots is predicting sales to fall by 6 per cent on last year during the next two quarters.

July 23, 2008 | posted by Michael Baxter in High Steet | comments (0) |

More and more of us are at it. We are at it at Lidl and Aldi too. But then again, they have been at it for a lot longer on the continent. Maybe it’s a case of no discounts please, we are British.

Aldi and Lidl managed to put on 20 and 14 per cent growth each over the year to 13 July, say the latest figures from TNS. It says, “The Discounters now account for a 5.9 per cent share of Grocery Spending, higher than ever before reported, and they are also the fastest-growing sector of the market.”

Then again, apparently, the French and Germans love them a good deal more. Discounters enjoy an 11 per cent market share in France and a 38 per cent share in Germany, according to Europanel.

Mind you, shareholders in most grocers should be pretty chuffed right now.

Asda and Morrisons enjoyed 9 per cent growth, Tesco 7 per cent and Sainsbury’s 6 per cent.

The big quest for deals extended to freezer centres too, which saw an 11.3 per cent growth, and all that slightly suspect talk about buying local led to a 15.9 per cent rise in sales of farm foods.

It does go to show that these days we are less accepting of price changes. In the 1970s we accepted prices hikes, and just forked out the money with a sigh. Now we let our feet, and indeed car, do the talking and shop elsewhere.

Incidentally, the latest TNS data showed a 4.4 per cent market share for the Coop and a 3.8 per cent share for Somerfield. You may know the Coop has bought Somerfield. The move will take the merged retailer into a comfortable fifth spot, behind Morrison, with 11.1 per cent market share.

July 2, 2008 | posted by Michael Baxter in High Steet | comments (1) |

Last year’s two big success stories on the High Street were John Lewis and Marks and Spencer.  And while all around others were moaning, the big two kept announcing surging sales.

Well, not any longer.

Recently, we told how sales at John Lewis fell 4.4 per cent over the last year.  Now the figures from Marks are out, and they are even worse.

During the last three months, underlying sales at Marks were down 5.3 per cent.

It is a little odd, because according to recent data from the Office for National Statistics, retail sales in May had their highest percentage increase since 1986.  Can you see why not everyone believes the ONS data?

But this was not any announcement of a fall in sales.  This was a Marks and Spencer announcement of a fall in sales.  And that means, time for a purge.

Well, maybe not a purge, but the retailer’s director of food is going.

Like-for-like food sales were down 4.5 per cent and general merchandise sales were down 6.2 per cent.

You can understand why the food business is struggling.   No one can deny the quality of M&S food, but it’s expensive, and right now, people want cheap.

Sir Stuart Rose said: “Pressures on consumer spending and increased competitor pricing and promotional activity, coupled with changes in consumer buying patterns, have resulted in a significantly weaker performance.”

The M&S announcement illustrates perfectly why many think the current inflationary pressures are a one-off.  With wage inflation staying muted, and shoppers clearly determined to find bargains, in some ways the signs point to deflation.

It is just that, as the Bank of International Settlements pointed out yesterday, it is all very well saying oil and food inflation is an external factor, but the real cause of high oil is high demand, everywhere.

So, on one hand, interest rates need to go up worldwide, but on the other hand, they need to go down in the UK to drive up waning domestic demand.

June 26, 2008 | posted by Michael Baxter in High Steet | comments (0) |

per cent

There is no doubt about it, there is something strange in the neighbourhood.

The ONS had retail sales in May rising at their fastest year on year rate since 1986, yet all around there is gloom.   So how do you square ONS data with anecdotal evidence.   Who is right?  Who are you going to call?

Answer:  the CBI.

The CBI has just released its distributive trades survey for June.  Thirty nine  of retail respondents to its survey reported that in the first half of June sales were lower than a year ago, while 30 per cent said sales had increased.

The resulting balance is minus 9 per cent. 

Now it had been worse than that.  It was worse last month, and the month before, but that aside you have to go back to March 2006 for the last time the index was so bad.    More to the point, the CBI index has been negative for three months in a row now.

That said, 2005 was minus scores for most of the year, so really the key will be what happens over the next few months.

The ONS finding for May was perhaps something of a freak, but what is clear is that right now the High Street is bad, but apparently not that bad.  Although it does appear the big supermarkets are clearing up, at the moment.

Andy Clarke, the new chairman of the CBI’s Distributive Trades Panel, and Retail Director of Asda, said:

“High fuel prices and concerns about the economy have blunted consumer appetites, and those retailers linked to the housing market are continuing to endure difficult conditions.

“Grocers have had another strong month, and we are seeing people spend more in supermarkets as they focus on the essentials and also upgrade to higher value food ranges instead of having a night out.”