UK high street sales stabilise

November 1, 2009

Conditions in the retail sector are beginning to stabilise, with sales broadly flat in the year to September, and expected to remain unchanged in October, according to the CBI’s monthly Distributive Trades Survey.

Responding to the business group’s latest survey, 39% of retailers said year-on-year sales volumes rose in September, while 36% said they fell.

The resulting balance of +3% was better than expected, and follows four consecutive months of falling sales. Looking forward to October, retailers expect sales will remain broadly flat compared with a year ago.

Volumes of orders placed with suppliers fell very modestly (a balance of -4%), the slowest rate since February 2008. They are expected to stabilise next month (+1%).

The three-month moving average of sales volumes, which smoothes out monthly peaks and troughs, improved on the previous month, a balance of -9%, compared with -16% in August. However, despite sales volumes stabilising, a net 22% of firms described them as below average for the time of year.

Andy Clarke, chairman of the CBI Distributive Trades Panel, and chief operating officer of Asda, said: “After such a difficult summer, it is encouraging to see signs that conditions in the retail sector are stabilising. However, with unemployment rising, wage growth low, and consumers building up their savings, spending is likely to remain subdued for some time.

“Grocers and shoe shops are continuing to enjoy solid growth, while car makers are seeing sales volumes hold steady, thanks to the scrappage scheme. In the months running up to Christmas we may see some shoppers bring forward spending to beat the planned VAT rise.

“After months of heavy de-stocking, retailers may now be starting to think about getting new products on the shelves.”

Inventory levels remain low, with a net 3% of retailers reporting volumes of stocks to be slightly more than adequate to meet expected demand, compared with a zero balance in August.

Turning to individual sectors within the industry, grocers, and footwear and leather retailers continue to enjoy strong year-on-year growth. All other sectors reported a fall, although the pace of decline is easing somewhat for clothing, and furniture and carpets.

After 11 months of falling sales, volumes in the wholesale sector were broadly flat in the year to September (a balance of -1%), compared with -48% in August. Food and drink, and clothing, textiles and footwear enjoyed the strongest growth. Industrial materials, builders’ merchants and electrical installation materials were the hardest hit, but durable goods sales remained flat. Sales volumes in the wholesale sector are expected to fall next month (-38%).

Motor traders’ sales volumes were broadly flat in the year to September (+1%). This was the highest balance since May 2008, but car makers had expected sales to grow slightly (+6%). Sales volumes are expected to fall next month (-27%).