The retail note - 8 September 2017
Stephen Springham, Head of Retail Research, breaks down the latest sector headlines.
3 minutes to read
- Halfords enjoyed a 4.8% in sales in the 20 weeks to 1 August, with like-for-likes up 2.7%. In its retail division, total sales jumped 6.2%, and like-for-likes rose 3.5%, an improvement the business attributed to a sharp rise in “staycationing”. Although it flagged currency headwind costs of £25m for the full-year, the business remains confident that it ”will fully recover the FX impact over time.”
- Solid figures from M&Co. The value fashion retailer reported a surge in operating profits of 37% to £6m for the year to February 2017. Sales increased by 1.5% (+1.8% like-for-like) to £165.6m. M&Co closed eight stores during the year and opened fourteen new ones. The business plans to open 12 to 15 new stores per year between now and 2022 in order to expand its store network by 75 outlets.
- More sobering figures from H&M. For the last reported financial year, the UK division of the Swedish fashion giant saw retail sales decline by 0.3% to £962.8m, while operating profit grew by just 0.1%. Given that there were a net new 18 store openings during the year, like-for-like sales must have been significantly down. However, these figures are largely historic (reflecting the 52 weeks to 30 November 2016), a reminder of how tough the UK clothing market was last year.
Stephen Springham, Head of Retail Research:
The anticipated post-Brexit slowdown in retail sales is starting to feel like a scene in Waiting for Godot. Everyone assumes that its coming is an inevitability, given the prevailing political and economic forces, not least the supposed squeeze on the consumer purse as inflation soars ahead of wages growth. And latterly, even the weather has provided little by way of saving grace. A slowdown is surely nigh.
Except it hasn’t happened. It will be a week or so until the official figures from the ONS are released, but we have already had surprisingly positive reads for August from the British Retail Consortium (BRC) and BDO. The BRC’s figures for August showed a year-on-year increase in retail sales of 2.4% overall and 1.3% on a like-for-like basis. BDO’S High Street Sales Tracker rarely provides much cheerleading for UK retailing, but even this has come up trumps this time around. Overall like-for-like sales were up 2% last month, making it the best month since September 2015 and the best August since 2013. So, despite miserable weather and a consumer with no cash, we have supposedly just had our best month on the high street in two years.
The BRC is at pains to downplay its own figures, almost to the point of apology. On the one hand, they point to the fact that “non-food sales have only just recovered to levels seen two years ago, after a dismal August in 2016.” The fact that they have recovered at all (+0.9% overall, +0.6% like-for-like for the three months to August) is a positive, not a negative. On the other hand, “strong figures for food [+3.2% overall, +1.8% like-for-like] are largely the result of rising prices, leaving growth in volume terms weaker than last year”. Again, what’s preferable – the volume growth and crippling deflation we had before or the inflation and lower volume growth (but growth nonetheless) that we have now? I know which the UK grocers would prefer.
The official ONS figures will undoubtedly be even stronger than both the BRC’s and BDO’s when they are released. For the simple reason that they always are. But even the most glass half full commentator can’t help but notice how strong the comparable figures were in the last few months of 2016. In Q4 alone, retail sales volumes and values were up by 6.2% and 5.6% respectively.
Surely retail sales can’t continue to defy gravity for ever? And Godot himself must soon make an appearance?