Frugal shoppers trim spending on food
DSGi and Sports Direct also feel effects of downturn
Friday 24 October 2008
Food sales in Britain have fallen for the first time in more than 20 years, as customers tighten their belts.
The grim retail sales figures from the Office for National Statistics came as DSGi, the owner of the Currys and PC World chains, and the sports retailer Sports Direct posted dire sales.
The data shed further light on theaccelerating speed of the consumerrecession as retailers hurtle towards what is expected to be one the worst Christmas trading periods for 30 years.
The ONS said that sales volumes in predominantly food stores, from butchers to the big supermarkets, fell 0.1 per cent for the three months to September, compared to the same period last year. This is first time they have entered negative territory since 1986.
While it is widely acknowledged that some consumers are switching to own-label products and discounters Aldi and Lidl, the figures suggest people are actually cutting back on the amount of food they eat.
Mark Hudson, the lead consultant for the UK retail and consumer sector at PricewaterhouseCoopers, said that hard-pressed consumers are cutting down not only on expensive food and treats but also the amount of food they waste. "It is an indicator of how tough it is starting to get," Mr Hudson said.
He added: "The consumer has been battered by a number of factors, such as house prices and energy bills, but now The fourth horseman of the Apocalypse is starting to rise in the form of unemployment."
Overall retail sales volumes grew by 2.3 per cent for the three months, but this was the worst performance from UK shops since April 2006, said the ONS. DSGi added to the gloom when it said yesterday it would cut another £30m, or 15 per cent, off its capitalexpenditure this financial year, and posted total underlying sales down 7 per cent for the 24 weeks to 18 October.
The drop in capital expenditure will partly come from the company "deferring" projects including a largeimplementation of SAP software, but DSGi is also trimming the amount of money being spent on the refurbishment of individual stores. However chief executive John Browett said it was still "full speed ahead" with the store refurbishment programme, which has so far delivered sales ahead of expectations.
"We are absolutely going to do this transformation programme. It is going to make a big difference," said Mr Browett. He declined to comment on City speculation that DSGi might be forced to scrap its dividend, after it was halved in May. Underlying sales at DSGi's UK computing division plunged 11 per cent, as consumers cut back on new purchases of PCs, laptops.
At its UK electricals division, which includes Currys, like-for-like sales tumbled by 7 per cent, partly driven by falling demand for flat-screen TVs.
Separately, in a pre-close trading update, Sports Direct said it continued to battle the "hardest trading conditions in its history", but said it expected to deliver underlying earnings (before interest, tax, depreciation and amortisation earnings of £135m for year 2008/09, in line with expectations.
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