'Consumer confidence fragile' as retail sales growth slows

November numbers poor as Christmas period looms
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Retailers' hopes of a bumper Christmas were dampened yesterday as figures revealed sales in November fell a long way short of expectations.

Underlying UK retail sales, excluding new space, grew at an annual rate of 1.8 per cent last month, a marked decrease on October's 3.8 per cent growth, said the joint KPMG British Retail Consortium (BRC) survey.

The figures were particularly disappointing given that November last year was a particularly bad month. Economists had expected like-for-like sales to be up by as much as four per cent.

The figures were dragged down by the weakest food sales growth since July 2007, largely resulting from tumbling food price inflation. Hefty discounting and the seemingly incessant downpours in November boosted sales of women's shoes and boots, but the milder weather took its toll on demand for winter coats, heavy knitwear and warm accessories. Total retail sales rose by 4.1 per cent last month, compared with 5.9 per cent in October.

Stephen Robertson, the director general of the BRC, said: "We would have expected much stronger growth because the comparison is with very poor results in 2008 when November was the second-worst performing month for the year."

Over the three months to the end of November, non-food retailers grew sales by 3.3 per cent, compared to grocers at 2.1 per cent growth. The BRC said this was the first time that general merchandise sales had been ahead of food since it started providing quarterly figures in October 2008. Mr Robertson said: "Non-food sales growth improved as the Christmas build-up began."

The BRC said that sales of women's footwear stretched ahead of men's and children's, citing the popularity of ankle and high-leg boots, as well as dressy sandals and party shoes for some chains.

Sales of furniture, flooring and homewares continued to rebound last month, in line with October, reflecting pent-up demand, although these retailers were up against steep declines last year. Helen Dickinson, the head of retail at KPMG, said: "Many retailers will be quietly confident that their performance will not be anywhere near as bad as some may have expected six months ago."

Certainly sales at John Lewis, the high street bellwether, have been powering ahead recently and reached a record of £102.4m, up 13.8 per cent, in the week to 5 December. On Saturday, London's retailers had their "best day's trading in two years", taking more than £200m, when the capital's Oxford Street and Regent Street were closed to traffic. However, more administrations are likely for the sector's weaker players over the next month, following the collapse of the bookseller Borders last month. Mr Robertson said: "Consumer confidence is fragile and has taken a turn for the worse. We're still the only major economy still in recession."

On Friday, the Global Retail Network said that 46 out of 235 major retailers had launched Christmas sale promotions, up 142 per cent on last year.

Mega Monday: The online shopping frenzy

*Whether you call it "Mega Monday" or "Cyber Monday", yesterday was the busiest day of the year for online retailers. Corporate productivity took a severe hit between 1pm and 2pm, when consumers spent a cool £33m, said Retail Decisions, the payment processing specialist.

A mind-boggling £1.4m was spent at 1.43pm, a 61 per cent increase on last year – making it the busiest online shopping minute ever in the UK.

Mark Newton-Jones, chief executive of Shop Direct Group, said: "Online sales are up 35 per cent year on year at Shop Direct. Best sellers so far are iPods, toys, video games and party dresses."

David Smith, operations director at IMRG, said: "The spending is being spread over a much wider range of products because there is no stand-out product, such as Wii-Fit or Play Station, this year." IMRG predicts that online sales in December will finish up by 10 per cent at £5bn.