Retail sales fall weighs on recovery hopes

Home, clothing and footwear retailers suffer

Hopes that the consumer downturn is easing were dashed yesterday when the Government said that retail sales volumes fell by 1.6 per cent in May, as retailers of clothing, footwear and household goods suffered declines.

The Office of National Statistics compounded the gloom by reporting that total sales volumes grew by only 0.6 per cent for the three months to May – one of the three worst quarterly performances since December 1995.

While retailers were up against a buoyant May last year when the sun shone and the economy was in better shape, the lacklustre data supports the widely held view among retailers that a sustained recovery in consumer spending will not occur any time soon – despite lower mortgage payments, fuel costs and utility bills. Following a rebound in retail sales in April, helped by the late Easter, total volumes fell by 0.6 per cent in May on the previous month, said the ONS.

Tarlok Teji, the UK head of retail at the accountancy firm Deloitte, said: "In the UK, a lot of consumers do have extra disposable income but are behaving with extreme caution. The fear of unemployment is still very real and will hold back a strong rebound in UK consumer spending for most of this year. We have been bouncing along the bottom for the last couple of months and this may remain the case for most of 2009."

Non-food retailers bore the brunt of the slowdown, with household goods stores suffering a 6.5 per cent fall in volumes, year on year, but textile, clothing and footwear stores were also down by 2.2 per cent, according to the ONS.

In May, predominantly non-food retailers saw their sales volumes decrease by 3 per cent, year on year, and volumes at primarily food stores declined by 1.3 per cent. While household goods stores endured the biggest fall, volumes fell by 4.1 per cent at other non-specified general merchandise retailers.

Stephen Robertson, the director general of the British Retail Consortium, said: "These figures confirm our findings that May's sales growth was well down on April's Easter-driven surge. Until we see a turnaround in the sales of big-ticket items it seems premature to talk of green shoots."

The BRC-KPMG Retail Sales Monitor reported that UK retail like-for-like sales fell by 0.8 per cent in May.

The ONS reported that between April and May predominantly non-food store volumes were down by 1.4 per cent.

Richard Hyman, the strategic retail adviser to Deloitte, said that 2009 will be "something of a game of two halves". He added: "The pressure on consumers' spending power has been eased a little in recent months as a result of lower interest rates and lower fuel costs, though this will disappear progressively as the second half unfolds."

He said that rising unemployment well into next year will prevent a meaningful recovery in confidence. "For these reasons," Mr Hyman added, " it is probable that we will be seeing less good figures emerging in the second half of 2009."

Olivia Gillan, at PricewaterhouseCoopers, said: "These latest figures seem to indicate that things are bottoming out, but I wouldn't expect any kind of sharp recovery this year."

The right fit: Tailor bucks high-street trend

The Savile Row tailor Gieves & Hawkes has found its business well suited to the downturn. Mark Henderson, the deputy chairman of Gieves & Hawkes, said its bespoke and personal tailoring sales were up in "double-digit" growth over the past 12 months, partly driven by customers wanting to look smart in the office or for job interviews. Speaking at a breakfast held by Walpole, the non-profit organisation for British luxury firms, Mr Henderson said it even sold a bespoke suit for £15,000 a couple of weeks ago. Overall UK sales at Gieves & Hawkes – which has 23 stores and concessions in the UK – are up in "single digits" over the past 12 months. The retailer's bespoke suits, which start at £3,800, are handmade on Savile Row. Mr Henderson said: "Since September, our tailoring sales have not missed a beat, and if anything, they are pretty damn strong at the minute." Before coming together, Gieves was founded in 1785 and Hawkes was established in 1771.

James Thompson