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BRC-KPMG: Squeezed Consumers Cut Spending

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The pandemic has meant much of retail bounced between being open and closed, significantly impacting sales and changing consumer behaviours. In May 2020, non-essential retail stores were closed, pushing many consumers to buy goods online. In this context, while all comparisons are provided on a year-on-year (YoY) basis, those focused on online/in-store have also been compared with May 2019 (Yo3Y). This will be clearly signposted below.

Sales figures are not adjusted for inflation. Given that both the May SPI (BRC) and April CPI (ONS) show inflation running at historically high levels, the small drop in sales masked a much larger drop in volumes once inflation is accounted for.

Covering the four weeks 1 – 28 May 2022

  • On a Total basis, sales decreased by 1.1% in May, against an increase of 28.4% in May 2021. This is below the 3-month average growth of 0.7% and the 12-month average growth of 4.1%.
    • On a three-year basis, Total retail sales grew 6.2% (Yo3Y) during May compared with the same month in 2019.

  • UK retail sales decreased 1.5% on a Like-for-like basis from May 2021, when they had increased 18.5%. This was below the 3-month average decline of 1.1% and the 12-month average growth of 1.8%.

  • Over the three months to May, Food sales decreased 1.3% on a Like-for-like basis and 0.7% on a Total basis. This is below the 12-month Total average growth of 0.6%. For the month of May, Food was in growth year-on-year.

  • Over the three-months to May, Non-Food retail sales decreased by 1.0% on a like-for-like basis and increased 2.0% on a Total basis. This is below the 12-month Total average growth of 7.0%. For the month of May, Non-Food was in decline year-on-year.

  • Over the three months to May, In-Store sales of Non-Food items grew 31.5% on a Total basis and 24.1% on a Like-for-like basis. This is below the Total 12-month average growth of 39.2%.
    • On a three-year comparison, over the three months to May, In-Store sales of Non-Food items declined 57.5% (Yo3Y) on a Total basis since May 2019.
  • Online Non-Food sales decreased by 8.5% during May, compared with a decline of 8.1% in May 2021. This is above the 3-month decline of 18.0%.
    • On a three-year comparison, Online Non-Food sales increased by 34.7% (Yo3Y) in May. This is below the 3-mth average increase of 41.4%.

  • Non-Food Online penetration rate decreased to 38.7% in May from 42.2% in May 2021. However, it was up 7.3 percentage points on the 31.4% seen at the same point in 2019.

Helen Dickinson OBE, Chief Executive | British Retail Consortium
“Sales continued to see declines as the cost-of-living crunch squeezed consumer demand. Higher value items, such as furniture and electronics, took the biggest hit as shoppers reconsidered major purchases during this difficult time. Nonetheless, fashion and beauty did well as people prepared for holidays abroad and the summer’s social calendar; with red, white and blue outfits adorning shopping carts ahead of the Jubilee weekend. Meanwhile, online sales appear to have stabilised at a ‘new normal’, with the share of total non-food retail sales coming through digital channels settling at around 39% compared with 30% pre-pandemic, though this is well down on lockdown peaks.

“It is clear the post-pandemic spending bubble has burst, with retailers facing tougher trading conditions, falling consumer confidence, and soaring inflation impacting consumers spending power. Supply chain issues including rising commodity and transport costs, a tight labour market and higher energy bills are forcing retailers to increase their prices, contributing to wider inflation. Profits may be squeezed further, as retailers continue to find efficiencies in their own operations and supply chains to reduce the impact of future price rises for consumers.”

Paul Martin, UK Head of Retail at KPMG | KPMG
“For the second month in a row UK retail sales declined, highlighting that consumers are becoming more sensitive to the cost of living.

“Non-food purchases related to the home, such as furniture, home appliances and computing, suffered the biggest falls in spending in May.  Online, although still significantly higher than before the pandemic, has now experienced a double-digit decline over the last three months.

“There was better news though for clothing, footwear and accessories sales, with both in-store and online purchasing driven up by the approach of the summer season and the promise of outdoor events and travel firmly on many consumers’ radars.

“The rising cost of living is going to remain the main story for retailers for the immediate future, with consumer confidence a key factor to watch out for.  Retailers will be hoping that a post-Jubilee and summer feel-good factor begins to improve confidence amongst some shoppers – as presently overall confidence levels are lower than sales may suggest.

“Cost and efficiency will firmly be top of agenda for most operators, and understanding how they can protect their margins whilst remaining price competitive for consumers.” 

Food & Drink sector performance | Susan Barratt, CEO | IGD
“Whilst the last four weeks show modest growth, we increasingly expect that value sales are being boosted by inflation this year and that underlying volume trends are weaker as shoppers economise to manage the cost-of-living challenges they face.

“Shoppers are finding it incredibly tough right now, and although the Chancellor’s announcement of a cost-of-living support package may have offered some respite, our Shopper Confidence Index data for May shows that shopper confidence is still incredibly low. Spending priorities are changing rapidly in reaction to continuous price rises, with shopper coping strategies differing by individual life circumstances.

“We anticipate the Jubilee may provide a welcome break and opportunity to celebrate with friends and family, with a third (30%) planning to celebrate over the Bank Holiday weekend. However, shoppers face a challenging few months ahead as they look to contend with the rising cost of living.”

Source : BRC-KPMG

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08 June 2022

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