BDO: June Sees Weak Retail Sales Growth Amid Turmoil In The Sector

• Total retail like-for-like sales grew by +1.9% compared to June 2022
• June’s weak, below-inflation growth means sales volumes are significantly down
• The homewares sector performed particularly poorly with total sales falling -0.6%
• Retailers need further support from government in order to invest and grow as costs spiral

Following May’s poor performance, total retail sales recorded modest growth in June, with like-for-like sales increasing just +1.9% according to new data from accountancy and business advisory firm, BDO LLP.  

According to BDO’s latest High Street Sales Tracker, total like-for-like (LFL) sales in June grew +1.9% from last year’s base of +8.4%. LFL sales growth remains well below CPI inflation, meaning that sales volumes have fallen significantly as consumers continue to tighten the purse strings. 

Sophie Michael, Head of Retail and Wholesale at BDO LLP, said: “The retail sector has recorded yet another month where sales volumes have come in well below inflation. Like-for-like sales growth has failed to exceed the rate of inflation every month since July 2022. 

“As the Government attempts to reach its target of halving inflation by the end of the year with a continued cycle of interest rate rises, we expect to see discretionary spend and sales volumes fall even further as rate rises begin to take effect and more households are hit by significantly higher mortgage and rent payments. The competition for the consumer purse has never been more important.” 

Sector Results 

Following last month’s negative set of results, the homeware sector continued its poor performance into June. Total homeware LFL sales fell by -0.6% this month from a negative base of -8.8% for the same month last year. In-store sales performed particularly poorly, falling -0.7% from a base of -1.9% in 2022. 

Total LFLs across the fashion sector grew just +3.0% in June, buoyed by a spike in in-store sales (+7.2%), due to the increase in high street footfall during the warm weather.  

The lifestyle sector also saw limited growth, with total LFLs rising by +2.3% across the month from a base of +6.9%. This marks the category’s seventh consecutive month of positive LFL sales. 

Sophie continued: 

“Reports of insolvencies in the retail sector have increased significantly recently, which reflects the severity of the situation. The retail sector is a vital cog in the UK’s economic engine. It is a major employer and requires urgent support to prevent further decline.  

“With overseas visitors increasing post-pandemic, there is an opportunity for retailers to grow revenue. One supportive action the government could take to help level the playing field for UK retailers with shopping destinations in Europe and further afield would be to reinstate tax-free shopping for overseas visitors. This we know is a well-publicised policy area that retailers want to see prioritised by the Government. 

“Retailers, like others in the wider consumer markets sector, are also facing labour supply challenges, which have been compounded by post-Brexit restrictions on the movement of workers. Retailers are having to pay more to retain their workforce and compete hard for new talent in the market. The increased costs add further fuel to the ongoing inflationary pressures.  Whilst the Chancellor has announced some measures in his recent statements to help encourage parents and some of those who had taken early retirement return to work, these have not yet made a significant impact.  

“While such actions may go some way to mitigating the adverse impacts, given the stubborn levels of inflation on essential spend, retailers will have to continue to focus on closely managing their cost base and how best they can drive top line revenue. It is likely that the gap for retailers between the winners and losers will only widen as the year progresses.”

Source : BDO

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