Retail shows signs of recovery but ‘little cause for optimism’

The British Retail Consortium (BRC) has reported a rise in retail sales in July, but said there is ‘little cause for optimism’ as many shops continued to struggle.

On a total basis, sales increased by 3.2% in July, against an increase of 0.5% in July 2019. It is above the three-month average growth of 0.4% and the 12-month average decline of 1.9%. This is the second consecutive month of growth since the start of the pandemic.

In July, UK retail sales increased 4.3% on a like-for-like basis from July 2019, when they had increased 0.3% from the preceding year. In July, like-for-like has been measured excluding temporarily closed stores but including online sales.

Online non-food sales increased by 41.0% in July, against a growth of 3.7% in July 2019. This is below the three-month average of 49.7% but above the 12 month average of 19.9%. Non-food online penetration rate increased from 29.7% in July 2019 to 42.0% this July.

Helen Dickinson OBE, chief executive, BRC, said: “July saw the second month of growth as lockdown measures eased and demand gradually began to return in some places. Many shops continued to struggle as footfall was down, with many people still reluctant to go out, and fewer impulse purchases. The strongest performance came from food, furniture and homeware, as consumers increasingly invest in their time at home, however, many shops, particularly in fashion, jewellery and beauty, are still struggling to survive. Online sales remained buoyant, slowing only slightly despite more shops reopening.

“While the rise in retail sales is a step in the right direction, the industry is still trying to catch up lost ground, with most shops having suffered months of closures. The fragile economic situation continues to bear down on consumer confidence, with some retailers hanging by only a thread in the face of rising costs and lower sales.

“Rents are also continuing to accumulate and the next Quarter Rent Day could see many otherwise viable businesses fall into insolvency, costing stores, jobs and economic growth. The Government should adopt the proposal from landlords and tenants for a Property Bounceback Grant, which would deliver £7 billion in tax revenue to the Exchequer and save 375,000 jobs.”

Last week, figures from the BRC revealed that UK footfall decreased by 42.1% in July, an improvement from June’s fall of 62.6%, according to BRC-ShopperTrak data. This remains below the three-month average decline of 61.6%. Footfall on high streets declined by 47.5% year on year, an improvement on June’s decrease of 64.5%.

“July was the first full month in which shops were allowed to open in all parts of the UK, ” said Dickinson. “While retailers will welcome the improvement in footfall across all shopping destinations, it remains well down on pre-coronavirus levels. The reopening of pubs, cafes and restaurants has also provided some additional footfall to many high streets, including a small boost to local retailers. It remains too soon to say how well retail will recover in the coming months, but it clearly remains a difficult trading period for many physical retailers.

“With retail footfall recovering slower than in many other European countries, much will depend on how fast consumer demand returns. Retailers have put in place a variety of measures to keep shoppers and staff safe, from regular cleaning and hand sanitiser to one-way systems and perspex screens at tills.

“We now need the Government to play their part by providing clear plans for schools, transport, and office working, all of which impact the way we shop. The safety of the public is a top priority and we believe clear communication will help build public confidence and help bolster local high streets and shopping centres during the summer months.”

Andy Sumpter, retail consultant – EMEA of ShopperTrak, added: “July saw a number of lockdown measures rescinded, and retailers will now look and hope for a return to some form of normality. As well as more retailers reopening in Scotland at the end of June, there was the introduction of mandated face coverings in stores, where adoption and compliance seem to have been good generally.

“The first full week with face coverings did not deliver any significant uptick in footfall over the prior week, however, it is likely that the good weather was a more significant factor.

“As footfall across parts of Europe has faltered recently, retailers will be hoping that the UK’s slow-and-steady recovery will continue. Furthermore, data from the US has shown that states that mandated face coverings first benefited from improved footfall recoveries, so we’ll be looking for the same here too in the coming weeks.”

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