The best month for UK Retail in 17 years?
Official retail sales figures for March from the ONS, full-year figures from JD Sports and Card Factory and interim results from Homebase.
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- Highly impressive FY figures from JD Sports. The sports fashion retailer posted a 15.5% increase in pre-tax profit to £355.2m in the 52 weeks to 2 Feb while EBITDA rose 26.8% to £488.4m. Group revenues surged 49.2% (+6% like-for-like) year-on-year to £4.7 billion. The global portfolio stood at 2,167 stores at the end of the year, up from 1,236, largely driven by the acquisition of US chain Finish Line. The business opened a net five stores across the UK and Republic of Ireland, taking its overall store estate to 390. The company stated: “We see our stores as a positive, not a negative feature of the business. They showcase the product and you get more theatre in a physical environment than you can online.”
- Greeting cards retailer Card Factory reported a decline in full year profits after trading was impacted by lower high street footfall. In the year to 31 Jan, pre-tax profit fell by 83% to £66.6m, while like-for-like sales dipped by 0.1%. Overall revenue increased by 3.3% to £436m. During the year, the business opened a net 51 stores as it looks to hit a target of more than 1,200 stores in the UK and internationally.
- A slow turnaround at Homebase following its disastrous time under Wesfarmers’ ownership and subsequent CVA. In the six months to 30 Dec 2018, operating losses were stemmed to £39.1m compared to £187.3 million in the same period of 2017. Sales declined to £497.8m from £515.6m in 2017. Through the CVA, the Hilco-owned business closed 47 loss-making stores and negotiated rent reductions across a further 70 sites.
Stephen Springham, Head of Retail Research:
March saw the best monthly retail sales figures since April 2002. An official fact, but not one the media seemed to have picked up at all.
Retail sales values (exc fuel) surged by a staggering 6.6% year-on-year in March. And these figures were barely flattered by inflation – retail sales volumes also grew by 6.2%. Even those that persist in the error of looking at month-on-month growth comparisons can only see positive numbers (volumes and values were both up 1.2%). These figures make something of a mockery of the earlier BRC figures and ongoing protestations that increased footfall didn’t translate into higher spending and we are in a “no-splurge” culture.
The figures are all the more remarkable given wider context. The timing of Easter always massively distorts retail trading patterns in March and April. This year, the weighting is very much on April, so we would have expected March to be much softer, even negative.
Of course, the naysayers are pointing to the ‘Beast from the East’ last year as the reason this year’s figures look so good. In actual fact, the ‘Beast from the East’ hit in February (the 22nd, to be precise) and was done and dusted by 4 March. The comp from March 2018 was actually fairly decent (+3.2%). In the context of year-on-year comparisons, ‘the Beast from the East’ is something of a red herring.
And, of course, there is the small matter of the wider macro-economic and political situation. The month the UK was supposed to leave the EU, but didn’t.
And was supposed to strike a deal with the EU or not, but did neither. A vortex of increasing rather than diminishing uncertainty would ordinarily play havoc with consumer confidence and completely undermine their willingness to spend, as any economic textbook will tell you. Except it clearly hasn’t.
And I don’t see this changing, in the short term at least. April’s figures will be strong. They will be boosted by Easter and history has shown us that retail sales tend to respond best when Easter falls late (as it does this year).
Especially if the weather is good, as it is forecast to be at time of writing (and with fingers well and truly crossed). Of course, the DIY / garden centres will be major beneficiaries of this, but so too will the grocers, particularly if we see a start to the BBQ season. The stars are aligning for a strong end to the month.
At the same time, I’m not blind to the massive challenges that the UK retail sector faces – in fact, we’ve just published a 50 page report on this very subject (see accompanying link). It would be wholly unrealistic to expect these challenges to go away anytime soon, regardless of good weather or ongoing strength in retail sales.
There are many root causes of the current malaise in the high street – a UK consumer tightening his/her purse strings in the face of political/economic uncertainty isn’t one of them.