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.

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.

June 20, 2008 | posted by Michael Baxter in High Steet | comments (0) |

Retail sales in May saw their biggest monthly rise since 1986.   

Let’s run that past you again.  House prices are in free fall, banks are announcing write-downs and rights issues with gay abandon, oil is shooting up, inflation is up; but our wages are not keeping pace, Mervyn King talks about real income falling, a credit crunch is supposedly strangling the life out of the economy, more and more economists are warning recession could be around the corner, and the High Street had its best month-on-month rise in 22 years.

The last time sales jumped that fast, Bobby Robson was manager of England, Jason Donovan and Kylie Minogue got married in Neighbours, and Tom Cruise was messing about with Migs in the film Top Gun.

How can this be?

“Sales by small and medium businesses show continued strength,” said the Office for National Statistics.   “In March to May the value of sales for all retailing was 4.2 per cent higher than in the same period a year earlier; sales by predominantly food stores were 5.4 per cent higher; sales by predominantly non-food stores were 2.8 per cent higher and sales by the non-store retailing and repair sector were 7.4 per cent higher than a year earlier.”

The rise in sales was put down to the good weather in May.  Good weather in May! Have you been outside much lately?  Sure, May had a week or so of good weather, but it wasn’t that exceptional..  It wasn’t the warmest May since 1986.  And it has rained a fair bit too.

The figures are at complete odds with findings from the CBI.   Its Distributive Trade index showed a reading of minus 14 for May.  Last month was worse than that, but April aside this was the worst reading since February 2006.

Then again, the British Retail Consortium was slightly more in line with the ONS data.  It recorded a 1.9 per cent rise in like-for-like sales on last month and a 4.6 per cent rise on a year ago.

The Telegraph chose to focus this morning on how unbelievable these figures are.  It quoted Philip Green as saying the data was bizarre.  He said: “These figures in no way reflect the current trend. They are totally misleading. I have no idea where they collect this information from. I’d love to know. Can I join the club that is seven points up in May?” 

The Telegraph also had a word with Sainsbury’s Justin King, who was equally perplexed: “The ONS doesn’t appear to understand how people shop…These figures are based on a small basket and exclude promotional activity.”

Even Charles Bean, the man being promoted to the post of deputy governor at the Bank of England, seemed puzzled, although he couched his words in econ speak. “The retail sales numbers do look somewhat stronger than really a raft of surveys,” he told the BBC.

Capital Economics said: “Given the backdrop of sharply rising inflation and plummeting confidence, we continue to think that the official sales figures should be taken with a pinch of salt. Indeed, the CBI retail sales survey and the official figures have recently diverged sharply.”

In complete contradiction to the reports saying the figures were unbelievable, others worried that they signified inflationary fears must be stronger than ever.  Ian Kernohan, economist at Royal London Asset Management told the BBC:  “Unfortunately this ’shop till we drop’ attitude will sow the seeds of its own demise. The risk of rate rises followed by a recession has just gone up.”

And the BRC’s Director General Stephen Robertson, perhaps with half an eye on the Bank of England and worried the data would prompt a rise in interest rates – the last thing BRC members want, said: “These official figures confirm our own findings that retail sales growth was lifted by the final arrival of warm weather in early May. As the sun came out so did shoppers, boosting sales of summer food and drink and particularly clothing which had been struggling.

“However, the economic fundamentals remain weak. Much of this sales growth is the result of discounts and promotions and people are still reluctant to buy more expensive items, such as furniture and electricals.

“Personal finances are under severe and mounting pressure. Customers are concerned about jobs and the housing market. So it remains to be seen whether this sun-driven boost is sustained over the coming months.”

The Bank of England, itself, seems more interested in surveys. And puts more credence on what the BRC and CBI are finding than the official data.

But how can the ONS have reported such sharp rises?

One possibility is that the data is wrong.     Maybe it doesn’t place enough emphasis on the so called BOGOF deals – buy one get one free.

Others say sales and specials have encouraged shoppers to spend more.   In other words, bargains were behind the May surge.  If that is so, then explain these recent comments from the CBI: “The prices of goods in the year to May increased at their fastest rate in 16 years, as many retailers passed on the growing pressures of rising energy, food and raw material costs.”

Another possibility is that all the doom and gloom doing the rounds is wrong.  The Bank of England is dead right, falling house prices don’t mean falling sales on the High Street. If that is right, then inflation really is a danger, and the Bank of E will need to up interest rates fast.

Here is another theory. Data from the Council of Mortgage Lenders, out yesterday, revealed that gross mortgage lending fell slightly from April.  This is a surprise too, but is largely explained by the market for re-mortgaging still apparently in buoyant shape.    A CML statement said: “The re-mortgage market remains on track to meet our forecast for growth this year, demonstrating the resilience of the market despite recent bad news. However, by comparison, the next few months will remain very weak for house purchase activity for the funding reasons which are now well rehearsed.”

In other words, if you want a loan to buy a house, that is tricky.  But if you want to re-mortgage, that is not so bad.

Maybe consumers have been topping up their mortgages, and spending some of the money.  If so, May saw no more than a kind of last hurrah, because, as house prices fall, this option will no longer exist.
 

February 12, 2008 | posted by Michael Baxter in High Steet | comments (1) |

And while our economic hope falls under a shadow, good news pipes up over the din of dismay. Yesterday, the British Retail Consortium revealed its latest set of results for the High Street – and sales shot up in January.

Retail sales were up 2.6 per cent on a like-for-like basis in January on the same month in 2007, or so says the British Retail Consortium (BRC) This was a sharp improvement on December, when sales growth was just 0.3 per cent. The three-month trend rate of growth rose to 1.5 per cent, from 0.8 per cent in December for like-for-like sales, and to 3.7 per cent from 2.8 per cent for total sales, reflecting the continuing growth of retail space.

Apparently it was a good month for food sales.

It wasn’t all good, though, because clothing sales were down on a year ago for the fourth month in a row, and this was despite aggressive discounting. Homewares and furniture showed a modest improvement but “remained difficult,” or so said BRC and it added, “while health and beauty picked up but did not regain last summer’s strength.”

There’s no prizes for guessing what the BRC wants to see. It wants to see cuts in the rate of interest. Stephen Robertson, Director General, British Retail Consortium was interviewed on the Today programme this morning, and he continued to bang the “cut interest rates drum”.

The BRC differs from other industry pressure groups in that it likes to tell bad news. Paint an unpleasant gloss, or make the High Street sound like a place of torture for its business, and then maybe the Bank of England will lower rates. And so it was yesterday.

Helen Dickinson, Head of Retail, KPMG, who co-produced the data with BRC, said, “While the ‘doom-mongers’ may be temporarily silenced by this month’s results, it’s certainly too early to draw any conclusions about how the rest of the year will pan out. The growth of 4.9 per cent in total and 2.6 per cent in like-for-like sales was heavily skewed by a strong performance in week one, as January sales absorbed demand carried over from a poor December, which then deteriorated as the month progressed. Another strong performance from food shows retailers are reluctantly passing on some price inflation to the consumer, whereas clothing, particularly women’s, continues to underperform.”

January 8, 2008 | posted by Michael Baxter in High Steet | comments (0) |

“UK retail sales rose only 0.3% on a like-for-like basis, compared with December 2006, when sales were up 2.5 per cent. December’s growth was the weakest since the decline in March 2006, when sales were hit by Easter falling in April in 2006. It was the worst December figure since 2004,” said the British Retail Consortium this morning.

Kevin Hawkins, Director General, British Retail Consortium said, “This result is somewhat worse than we expected and points to a very challenging first half for 2008. Given that the full effects of the Bank’s previous increases in interest rates have yet to be felt by many households, retailers and manufacturers alike need a rate cut now - preferably a full half-point.”

Actually, when you think about it, these figures really are bad because, as you will know, the High Street was splattered red in December with sale signs. So at a time of anaemic sales growth, margins are getting much tighter.

Then again, the retail boom of the last few years was down to unsustainable consumer borrowing; borrowing when we were supposed to be saving for our pensions. The High Street has got used to this sky-high spending, but it was inconceivable that the growth could continue.