Retailers signal gloom over sales in August

Balance of sales down in July but decline is bottoming
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The Independent Online

UK retailers said that sales fell for the third consecutive month in July and they expect next month to deliver worse figures, but the slowdown in consumer spending appears to be bottoming out.

Some 32 per cent of retailers said that sales volumes improved, year-on-year, in July, but 47 per cent said they fell, the CBI's Distributive Trades Survey revealed. However, the net balance of 15 per cent of retailers reporting falling sales was better than the forecast of negative 21 per cent and was a 2 per cent improvement on June's figures.

In July, the star performers were footwear and leather retailers, with a net balance of 64 per cent growing sales – the best performance since August 2007. While the overall CBI figures were disappointing compared to the 1.2 per cent retail sales rise between May and June, according to the Office for National Statistics, a number of retailers have posted buoyant figures to suggest the worst of the downturn is over.

Richard Lowe, the head of retail and wholesale at Barclays Commercial Bank, said: "The CBI's findings stand in contrast to the good news received last week from the ONS stats, but do little to affect the signs that declining retail sales are bottoming out."

Last week, the grocer Morrisons and the fashion retailer Next posted profit upgrades, both in unscheduled statements, after recent trading exceeded expectations.

Andy Clarke, the chairman of the CBI Distributive Trades Panel, and Asda's chief operating officer, said: "Many retailers are having a difficult summer and no pick-up is expected in August. But the overall sales falls are not as heavy as we saw at the start of the year, and some retail sectors are reporting growth."

A net balance of 23 per cent of retailers expect sales to fall in August, said the CBI. Mr Clarke added: "The recent sharp rise in unemployment will worry many consumers, and is likely to constrain sales growth in the months ahead."

While the net balance of 15 per cent of retailers posting falling sales in July was ahead of the average level of negative 25 per cent for the first six months of the year, it was below the long-term average of positive 18 per cent.

Furthermore, a balance of 32 per cent of retailers said that sales were poor for this time of year, according to the CBI. Apart from a strong performance from grocers, and footwear and leather retailers, all other non-food chains posted falling sales. Of these, the worst performing retailers were chemists, with a net balance of 60 per cent suffering falling sales in July. Those in others sectors, notably booksellers and stationers, hardware and DIY, furniture and carpets, and durable household goods, also fared badly. To a lesser extent, a net balance of 27 per cent of clothing retailers posted falling sales.

According to the CBI, a net balance of 19 per cent of wholesalers posted falling sales in July, but this was far less severe than the negative balance of 36 per cent in June. Similarly to pessimistic retailers, a balance of 38 per cent of wholesalers expect sales to be lower in August.