By Marcus Leach
Data released by the British Retail Consortium (BRC) has revealed that UK retail sales values were 0.6% lower on a like-for-like basis from August 2010, when sales had risen 1.0%.
On a total basis, sales were up 1.5%, against a 2.8% increase in August 2010. Food sales growth was similar to that in July. Non-food sales fell further below their year-earlier level, with footwear and homewares showing the largest declines, despite further promotions.
Big-ticket purchases were still often deal-driven, hit by fragile consumer confidence and the weak housing market.
Non-food non-store (internet, mail-order and phone) sales growth picked up to the best since April. Sales were 12.6% higher than a year ago, after a relatively weak 9.6% in July but 17.8% in August 2010.
"The retail sector's performance for August has been essentially flat, particularly bearing in mind the increase in VAT which will be responsible for some of the growth in spending. It remains a tale of two halves. The food sector has proved more resilient but non-food retail showed a marked decrease in sales year-on-year," Stephen Robertson, Director General, British Retail Consortium, said.
"The spell of hot weather at the start of the month was a boost for some retailers but it failed to last long enough to make a big impact. People had bought summer fashions early during the Spring heatwave and were reluctant to spend again while families left the traditional back-to-school purchases until late in the month, possibly hoping to benefit from further promotions.
"The riots were not widespread or prolonged enough to have a significant impact on these UK-wide figures. Poor consumer confidence, high inflation and the on-going squeeze on personal finances remain the biggest threats to the retail sector. Sales of big-ticket items are very dependent on discounting and many retailers' margins are being cut to the bone."
Helen Dickinson, Head of Retail, KPMG, said she was concerned at how certain sectors are struggling in current economic times.
"The weaker sectors are really struggling. For non-food, the picture is disheartening with one of the worst monthly results of the year thus far - toiletries, cosmetics, and menswear the only sectors showing growth," she said.
"The differential between food and non-food performance continues to grow with food sales in value terms remaining relatively resilient. Given that much, if not all, of the growth is inflation and a higher VAT rate versus last year, this isn't particularly good news for retailers as they struggle to maintain their margins.
"Promotional activity remains high to drive footfall and interest which is a delicate balancing act for retailers to ensure the volume uplift compensates for the margin losses."
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