There were contrasting reports on the state of the retail sector last month.
According to the Office for National Statistics (ONS) retail sales growth almost stalled in February as consumers cut back on spending. Sales growth slowed to 0.4% when compared with February 2008, a sharp slowdown in the rate of growth after a 3.6% rise in January. This was the smallest annual increase since September 1995, according to the ONS. The figures suggest that retailers are still attracting shoppers, but through discounting that has hit profits.
Retail sales have so far held up much better than many analysts had expected as other parts of the economy have declined. Nevertheless, the past year has seen a big change in the spending patterns of UK households, in response to the growing recession and the credit crunch, the ONS said separately, in its latest edition of its publication Economic & Labour Market Review.
On a monthly basis, retail sales fell from January to February, more than had been predicted, with textile, clothing and footwear store sales down by 3.7%.
Supermarkets doing well
While High Street retailers are reporting weaker profits and cutting back expansion, supermarkets have announced better than expected results. The value of food sales has held up strongly as most food is still regarded as an essential item, the ONS said in the Economic & Labour Market Review.
Supermarket chain Sainsbury's reported that same-store sales increased in the first three months of the year boosted by its range of cheaper "basics" products. That followed rival Morrisons, which reported a 7% increase in annual pre-tax profits, and Waitrose, which saw sales touch £4bn for the first time. The ONS said that sales at food stores were 4.9% higher for the three months to February than in the same period last year.
Central London bucking the trend?
The British Retail Consortium/KPMG Retail Sales Monitor suggests that like-for-like sales in Central London were up 5.9% on one year earlier. This compares with a 1.8% fall over the same period for the rest of the UK.
Helen Dickenson, Head of Retail for KPMG commented that “The results for the month were impacted negatively by the snowy weather in the first week - but this was more than offset by the ongoing benefits of the increased level of foreign visitors continuing to take advantage of the favourable exchange rate, and the high levels of discounting and promotions”.
At present London’s labour market appears to be holding up better than the UK as a whole. London’s working age employment increased to 71.7% (up from 70.7% a year earlier) in the three months to January 2009. That of the UK fell from 74.9% to 74.1% over the same period.