UK retailers expect sales growth to fizzle out in New Year
Retailers enjoyed a third consecutive month of sales growth in the early build up to Christmas, but are predicting flat sales in the New Year, according to the CBI.
The business group’s latest Distributive Trades Survey shows that in the year to December 9, retailers maintained year-on-year sales growth at November’s levels, led by a strong performance from grocers and durable household goods. Meanwhile, motor traders reported their fastest sales growth since April 2002.
Asked about sales over the last year, 45% of respondents said they had risen, while 32% reported a fall. The resulting balance of +13% is slightly lower than had been expected (+19%), but matched November’s figure. Because the survey closed on December 9 retailers could still see a further sales boost for the month as a whole.Sales for the time of year were reported to be poor by a balance of 16% of retailers, and a net 13% expect sales to remain below seasonal norms in January.
Andy Clarke, Chairman of the CBI Distributive Trades Panel, and Chief Operating Officer of Asda, said: “With a week left to go until Christmas, retailers may yet benefit from a flurry of last-minute sales and from shoppers bringing forward spending to beat the VAT rise. “Grocers have continued to enjoy strong growth after some fierce price-cutting, while motor traders appear to be reaping the benefits of the scrappage scheme with sales growing at their fastest rate in seven years. Sectors relating to the housing sector are also seeing improvements.
“Although individual retailers may post healthy-looking Christmas numbers compared to the same time last year when we were in the grip of the recession, conditions across the whole of the sector are likely to remain challenging in 2010. The recent growth in retail sector sales is expected to fizzle out in the New Year.
“Meanwhile, retailers also face the additional challenge of having to change the prices of everything on the shelves to comply with the VAT rise during their busiest trading period.”
Stock levels remain almost unchanged from November with a balance of +7% reporting them adequate to meet demand.The volume of orders placed upon suppliers rose again this month (+7%), at a slightly slower rate than expected (+13%). Mirroring the movement in sales volumes, orders are also expected to be flat in the New Year.
Looking at individual retail sectors, grocers, durable household goods, footwear & leather, and furniture & carpets posted solid growth. Booksellers & stationers saw November’s strong performance reversed this month, while chemists also saw a sharp fall in sales. Hardware, china and DIY stores reported sales to be broadly unchanged after several months of falls.
In the wholesale sector, sales volumes were flat (+1%), beating expectations of a fall (-31%). Very modest sales growth is anticipated in January (+4%). After fourteen months of falling sales, industrial materials reported sales to be broadly unchanged on a year ago (+3%), the highest figure since August 2008. Clothing, textiles and footwear wholesalers saw the strongest sales growth since March 2004 (+43%).
After a torrid year, motor traders enjoyed a second month of sales growth (+58%) and they expect a similar rise in sales in the New Year (+60%), suggesting that the extension of the car scrappage scheme is boosting demand. A balance of +51% of motor traders said sales for the time of year were above average, which surpassed expectations that sales would remain below seasonal norms (-17%).
