Fueling a retail sales slowdown
This week’s retail note analyses the less-than-positive September retail sales figures and release from the Office for National Statistics.
5 minutes to read
Key Messages
- Fuel crisis skews numbers and hits underlying performance
- Retail sales values (exc fuel) down -0.2% in Sep 2021
- Fuel sales +12.3% in volume, +31.7% in value
- Food sales +0.7% y-o-y in Sep
- Non-food sales +0.8% y-o-y in Sep
- Strong growth in clothing (+12.1%) and footwear (+13.3%)
- Discernible slowdown in HH goods (-4.6%)
- Online sales down -2.3% y-o-y
- Multi-channel online outperforms online pure-plays (-3.5%)
Unequivocally bad or just all over the place? The Office for National Statistics (ONS) retail sales figures for September are arguably both. The fuel crisis clearly didn’t help matters on two key counts. Artificially inflated demand for petrol massively skewing the numbers. At the same time, reduced mobility generally on the back of the crisis probably curtailed many shopping trips and this stymied demand for other retail goods.
The headline numbers
None of the headline numbers are good. The ‘purest’ headline metric (year-on-year retail sales values exc fuel) saw a decline of -0.2%. The equivalent volumes figure (i.e. net of inflation) saw a even steeper decline of -2.6%. In short, sales going backwards despite significant inflation. The far less meaningful (but more widely reported) month-on-month figures were likewise in negative territory (values -0.4%, volumes -0.6%). This is significant only on the basis that September is traditionally one of the biggest months in the retail calendar and in a “normal” year September’s sales would always be higher than August’s. Not in these abnormal times.
The fact that fuel is included in retail sales data is a perennial bone of contention (fuel sales are more volatile generally, more prone to inflationary/deflationary fluctuation and quite frankly, aren’t retail) and this month’s figures more than validate this school of thought. Fuel sales volumes were up +12.8% y-o-y in September, values up a massive +31.7%. Fuel demand soared, fuel prices skyrocketed. Nothing we didn’t know, but frankly nothing to do with the high street. The only slight irony is that this made one of the headline metrics appear fairly robust. Total retail sales values (inc fuel) actually grew y-o-y by +2.3%.
The real story
The devil and all his extended family are in the detail. And thankfully, there is some positivity if you delve deeply into the numbers. And also contradiction. Surprisingly (given the headline numbers) both food and non-food sales were in positive growth territory year-on-year (+0.7% and +0.8% respectively). In the case of food, this actually marked an acceleration/recovery from the previous month (+0.2%). One of the main drags on headline performance was actually online pure-plays (e.g Amazon etc), with non-store operators actually reporting a year-on-year decline of -4.9%.
Very mixed performance amidst the myriad of sub-sectors that collectively constitute non-food. On the positive side, clothing had another strong month (+12.1% y-o-y) as did footwear (+13.3%). But there is clear evidence of a slowdown in bulky-goods demand. Household goods were down -4.6%, furniture -5.8%, carpets -4.1%, electricals -0.4% and DIY -5.7%. All possibly falling victim to fuel-induced lack of mobility over the month? The one OOT sector to buck this trend was garden centres/petstores (+7.5%).
Of course, there is also the issue of last year’s peaks and troughs washing through. For example, the -5.7% decline in DIY sales was against a comp of +32.0% in September 2020. Similarly in chemists (-6.6% in September 2021 vs +64.7% in September 2020). Conversely, a seemingly dramatic spike in PC and mobile phones sales last month (+42.5%) was leveraged off a very soft comp last time (-43.8%).
Online – rising or declining?
Those looking for clarity will struggle in the online figures. All online sales declined by -2.3% year-on-year, but by quirk of the way the ONS calculate their numbers, online penetration actually increased to 28.1% in September (although Mintel calculate the actual figure to be more like 25.9% on a non-seasonally adjusted basis).
Within online, sharp contrasts between food and non-food. After months of slow decline, there was a sudden reversal in online grocery sales, which grew +2.1% year-on-year – surely a by-product of the fuel crisis? In contrast, non-food online sales declined by -2.6% year-on-year, with online sales from household goods retailers down -0.9% and online sales from department stores slumping -15.3%. In contrast, online sales from fashion stores were up +5.9% year-on-year. With non-store retailers collectively down -3.5%, a triumph for multi-channel operators over online pure-plays?
What does it mean?
The answer is always that it is dangerous too read too much into one month’s retail sales figures. And that it is easy to blame the fuel crisis in this instance. That said, the last two month’s figures haven’t been great and more question marks are being raised as to the robustness of the consumer economy.
My take is that food sales have generally normalised and will settle in very low single digit growth territory going forwards, with occasional month-on-month fluctuation. Non-food sales are more volatile and some of the heat has gone out of bulky goods demand (especially DIY). The mini boom might be over, but we are not looking at a precipitous decline. Having been through the mill more than most during the pandemic, fashion retailers are rebuilding on the back of a sustained period of positive growth.
Not great retail sales numbers, but this is not necessarily reflected in retailer trading statements of late, most of which have been fairly upbeat, but cautious at the same time. Much for retailers to play for in the deeply-unimaginatively titled ‘Golden Quarter’.