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The High Street suffers worst summer for six years

High streets in the UK have endured their worst summer in summer in six years, reports The Guardian, as unpredictable weather and the lure of restaurants and holidays have kept shoppers away.

According to figures from accountants BDO, underlying sales (excluding new store openings) fell by 1.1% in July. Sales fell by 2% in the previous month and by 0.9% in May, which means that stores have seen three consecutive months of decline since 2009.

A survey of 85 medium-sized retailers including Oasis, French Connection and Hobbs, found that fashion retailers were the worst hit, with sales down by 1.4%. Homeware sales were down by 1.1%, which was surprising considering the buoyant housing market.

Head of retail and wholesale at BDO, Sophie Michael, reported that some fashion retailers had tried to cope with a cold start to the simmer by launching their summer sales earlier than normal, but they were hit with a decline in consumer confidence due to the economic chaos in Greece. She also pointed out that those who delayed until August did not fare much better either.

“Consumers remain cautious with regard to spending: the political landscape is still cooling after the election, and speculation over interest rate rises continues to create uncertainty,” said Michael.

She said shoppers were indulging in “selected spending” at restaurants and bars, rather than on homewares and fashion.

Retailers will be disappointed with the figures, after suffering a tough autumn last year when the weather was unseasonably warm and endured a difficult start to spring, which was much cooler this year than last.

The continued caution of shoppers came despite an increase in disposable income, with several choosing to spend money on more lavish items that they were previously holding back on, such as cars or holidays.

It seems that expectations of interest rate rises are weighing on consumers’ minds, alongside changes to tax credits and other benefits announced by the Chancellor last month.

According to the regular GfK survey BDO’s figures reflect a slump in consumer confidence last month, while the number of shoppers visiting the high street slid by 1.1 per cent between April and June, according to the British Retail Consortium.

Jamie Merriman, research analyst at Bernstein believes that fashion retailers are less likely to benefit from an improvement in the economy because they haven’t suffered as much as other businesses in the recession.

She said: “What we have heard from retailers so far is that summer has been a bit mixed. When we have volatile weather it’s never a surprise to have clothing sales.”

However, she went on to say that those retailers with flexible supply chains and had made the right calls on trends and discount activity, were still likely to have performed well.

Last month Next increased its predicted annual profits by 2% after warm weather in July helped to boost sales.

“Good retailers will outperform in this situation. They are not immune to the weather but tend to do better,” said Merriman.

Chief executive of Karen Millen, Mike Shearwood, said fashion retailers were also failing to deal with a dramatic change in the way people shop.

In the past, people would visit several stores and try on a variety of outfits before making their choice, increasingly shoppers pick what they want online and head straight for a particular shop – cutting down the opportunities for retailers to entice them to buy other things.

Related article: Click-and-collect is the new battleground for retailers - but is it bad for business?

“There has been a huge change in shopping habits,” said Shearwood. He added that retailers had also tried to cut back on discounting this summer, and this had not paid off for every chain. “This season has been mixed,” he said.

Related article: Should small retailers rush to adopt Apple Pay?


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