Soaring clothes sales in June banish gloom from high street

Heatwave brings signs of retail stabilisation
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The Independent Online

The heatwave and hefty discounting helped retailers to deliver a 2.9 per cent spike in sales volumes in June, raising hopes that the worst of the consumer recession may be over. However, industry experts have warned that rising unemployment could make a sustained recovery elusive.

Clothing and footwear store retailers basked in an 11.3 per cent uplift in sales volumes in June, year on year, as the sunshine led shoppers to update their summer wardrobe, according to the Office of National Statistics. In a further sign of stabilisation, the ONS said that retail sales grew by 1.2 per cent between May and June this year.

Richard Lowe, the head of retail and wholesale at Barclays Commercial Bank, said: "It is increasingly apparent that declining retail sales have arrested. June's figures indicate a healthy increase month on month, and after a poor performance this time last year 2009's summer figures are looking more encouraging."

The ONS report followed positive data earlier this month from the British Retail Consortium (BRC) and KPMG, which revealed that UK retailers' like-for-like sales rose 1.4 per cent in June. This week, the grocer Morrisons and the fashion retailer Next, in unscheduled statements, said their full-year profits will be higher than expected after buoyant recent trading.

In addition to strong clothing sales, predominantly food stores grew sales volumes by 2.6 per cent in June, compared with a year ago, and primarily non-food retailers were up by 2.4 per cent, said the ONS. Andy Garbutt, the retail director at the accountancy firm PricewaterhouseCoopers, said: "Consumers opened their wallets in June due to the better weather, extensive discounting and slightly improved consumer sentiment."

Household goods retailers, particularly furniture and hardware chains, continue to find life tough, with sales volumes down 5 per cent in June, year on year, said the ONS. Between May and June, sales volumes at household goods stores fell by a less severe 0.7 per cent, bolstered by an improved performance at electricals and hardware retailers. Clothing and footwear stores grew sales volumes by 4.7 per cent over the same period, driven by shoppers buying new clothes for the summer.

Stephen Robertson, the director general of the BRC, warned that rising unemployment was likely to hit sales of big-ticket items for some time to come. He said: "Given uncertainty about jobs is sure to go on rising well into next year, even the sunny weather can't provide enough of a feelgood factor to ease customers' nervousness about spending on big-ticket items." In the three months to June, total retail sales volumes were up 1.3 per cent on last year.

Tarlok Teji, the UK head of retail at Deloitte, warned of youth unemployment. He said: "Until now, younger consumers had offered one bright spot in an otherwise gloomy year as they proved resilient to the recession. But with one in six 18- to 24-year-olds now out of work, this bubble may be about to burst."

Insolvency practitioners also expect more retailers to collapse over this year, although no one is expecting the deluge of retail administrations seen in December and January. In fact, PwC said insolvencies in the sector fell 23 per cent to 552 in the second quarter, compared with the previous three months. But the second-quarter insolvency figure was 24 per cent higher than 12 months ago.