Retail sales in January – far better than reported (yet again)
ONS retail sales figures for January miss-reported in the media, trading updates from Asda, Dunelm and Bunnings.
3 minutes to read
- Curiously positive reporting of lacklustre trading figures from Asda. The business reported a 0.5% increase in like-for-likes over the 13 weeks ended 31 Dec 2017. A significant deceleration on the previous quarter, growth substantially below inflation (implying volume declines) and by far the weakest performance of the Big Four in Q4 (Tesco supposedly “disappointed” with three times this level of growth). Asda’s shopper numbers were down 1.6% year-on-year and operating income declined by an undisclosed amount.
- Curiously negative reporting of generally strong trading figures from Dunelm. The value homewares retailer saw revenues for the 26 weeks ended 30 Dec 2017 soar by 18.4% to £545.5m. Like-for-likes sales also grew by a very healthy 6.0%. Profit before tax and pre-exceptional items was down 8% to £60.0m, due to greater investment and consolidation of Worldstores trading losses.
- Suitably horrible trading figures from Bunnings UK & Ireland, in the wake of management warnings a couple of weeks ago. The business reported a loss of £97m in the six months ended 31 Dec 2017, against a loss of £28m in the comparable period the previous year. Revenue fell by 15.7% to £517m. Five further Bunnings conversions will take the total to 24 by June – by which time a decision will be made on the future of the business.
Stephen Springham, Head of Retail Research:
Surprisingly robust January retail sales figures failed to shake off the negative blinkers of many in the media and City. ‘Shops suffer dismal start to the year – worst January for retailers since 2013’ and ‘January blues as inflation hits the high street’ were just two of the newspaper headlines that left me shaking my head. Many reports seemed to have been written with complete prejudice and without any recourse to the official numbers.
Retail sales values (exc fuel) grew by 4.3% year-on-year in January. This was the highest rate of January growth since 2011. But as our friends in the media point out ad nauseam, this figure was flattered by inflation. Retail sales volumes (exc fuel) grew by a more modest 1.5%. This was indeed the lowest level of January volume growth since 2013 (0.8%). But to focus on this figure conveniently ignores the heavy deflation that the retail market laboured under between 2014 and 2017.
Unbelievably, this volume growth was apparently below “City economists’ expectations”. Really?? Any City economist projecting volume growth of more than 1.5% needs a severe reality check. Indeed, there is huge irony in the fact that the retail sector is being constantly panned by those supposedly in the know, yet they still have such lofty expectations. You can’t have it both ways.
Of course, many commentators (media and economists alike) made the schoolboy error of focussing on the month-on-month figures, rather than the year-on-year ones. Obviously, the former figures are never going to shoot the lights out (+0.1%), but are essentially meaningless and certainly not worth dwelling upon. Retailing is seasonal and no adjustment by the ONS is going to fully reflect the fact that we spend more money at certain times of the year than others. Put bluntly, we spend loads more cash at Christmas than we do in January, so why compare the two months? For that matter, the fact there was any month-on-month growth at all is staggering.
Nor did the other lazy media fall-back of grocery being the sole driver of retail sales growth ring true in the latest figures. Foodstore volumes declined by 0.9%, while non-food retailers achieved volume growth of 2.6%. Surely that was above the expectations of even the most bullish City economist (if such a thing exists)? Hard to conclude that the “high street had a terrible start to year” on the evidence of these official numbers.
I fully acknowledge that retail sales figures only tell one part of the retail story, rather than the whole thing. And that there is absolutely no disguising the fact that the retail sector faces severe challenges. Overcoming overly-negative press that refuses to acknowledge official data shouldn’t be one of them, but sadly it is.