City snapshot: UK retail sales falter as fuel crisis hits confidence

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UK retail sales rose by their slowest rate since the UK was in lockdown in January as fuel shortages and wet weather hit consumer purchasing.

The British Retail Consortium-KMPG Retail Sales Monitor found that, on a Total basis, sales increased by 0.6% in September, against a growth of 5.6% in September 2020 and below both the 3-month average growth of 3.1% and the 12-month average growth of 9.8%.

On a 2-year basis, Total retail sales grew 5.8% during September compared with the same month in 2019.

UK retail sales decreased 0.6% on a like-for-like basis from September 2020, when they had increased 6.1%.

Over the three months to September, food sales increased 2.3% on a total basis and 1.7% on a Like-for-like basis. This is below the 12-month Total average growth of 4.9%.

Non-Food retail sales increased by 3.8% over the three month period on a total basis and 1.6% on a like-for-like basis.

Three month in-store sales of non-Food items grew 10.8% on a total basis and increased 6.6% on a like-for-like basis.

Online Non-Food sales decreased by 7.3% in September, against a growth of 36.7% in September 2020, while non-food online penetration rate dropped to 40.1% from 44.9%.

BRC CEO Helen Dickinson commented: “September saw the slowest retail sales growth since January, when the UK was in lockdown. There are signs that consumer confidence is being hit as the fuel shortages, combined with wetter weather, had an impact in the second half of the month.

“This had a bigger effect on large purchases such as furniture and homeware. In-store purchases regained ground, and sales growth continued to strengthen for footwear and fashion, particularly formalwear with many workers returning to the office this autumn. While online sales were down on the previous year, they remain significantly above pre-pandemic levels, reinforcing the permanent changes in consumer behaviour.

“An uncertain backdrop and slower growth means the fourth quarter is looks challenging as the economic recovery is dependent on strong retail sales during the festive season. Retailers, farmers and manufacturers are already making preparations to ensure enough food and festive gifts move through the supply chain in time for Christmas.

“Unfortunately, the lack of drivers is hindering these preparations and increasing costs, which will eventually be reflected in higher prices. Retailers are working hard to recruit and train thousands of new British drivers, but in the interim Government needs to urgently extend its visa scheme to address the shortfall of 90,000 drivers. Without swift action, customers face disruption and frustration this Christmas.”

Paul Martin, UK Head of Retail at KPMG, added: “September is traditionally a strong month for UK retailing as it’s back to school month, and in addition this year back to office purchases dominated sales as consumers shopped for new clothes and footwear as many headed back to their workplace for the first time in 18 months.

“Fuel panic buying bought into sharp focus the impact supply chain bottlenecks and labour shortages can quickly have for consumers. The energy crisis is set to have further impact on inflation levels, putting pressure on household spending and retailers will be hoping for some good news from the Chancellor in his Budget to help them manage rising costs.

“As we run into the crucial Christmas shopping period, retailers continue to face staffing pressures and supply chain issues, with challenges getting product into the UK and getting goods in to customers‘ hands. This may feed into limited availability of certain products and the spectre of price rises remains as retailers pull out all the strings for Christmas. Consumers are expected to start shopping earlier to bag those items already being reported as potentially out of stock by December and successful retailers will have to work very hard to ensure the right availability of the right product at the right price to satisfy the requirements of an ever more demanding customer.”

IGD CEO Susan Barratt, focussing on food and drink sector performance, commented: “With no big calendar events to drive sales, the food and drink sector put in a lacklustre performance in September. It was an uneasy month for shoppers, with a continual flow of news around the availability of food and fuel; sales slowed compared to August ‘21 and were slightly down year-on-year. However, performance is still significantly elevated compared to the pre-pandemic period of September ’19.

“Driven by cost-of-living fears, IGD’s Shopper Confidence Index recorded its largest monthly decline in September, reaching its lowest level in a year. Concern around food price inflation has now reached its highest level since March ’13, with IGD’s ShopperVista revealing that 85% of shoppers expect food and grocery prices to get more expensive in the year ahead, up from 79% in August ’21.”

Morning update

Consumer card spending grew 13.3% in September compared to the same period in 2019, according to Barclaycard. However, ongoing supply chain shortages and rising food and energy prices have hampered consumer confidence.

Spending on essential items increased 14.4% – the highest uplift in more than two years. This was driven by supermarket shopping (+14.7%), as well as a surge in demand at the pumps and climbing petrol and diesel prices, causing the sharpest growth in fuel spend in over 24 months (+11.1%).

The ongoing shortage of HGV drivers is also making it more challenging for Brits to source some essentials in supermarkets and grocery stores. Almost half (46%) have reported seeing empty spaces on the shelves and 18% have found it harder than usual to find fresh fruit and vegetables. A further 13% have also found it difficult to purchase soft drinks, frozen goods and fresh fish and meat.

While spending on non-essential items grew 12.9% last month, the increase was slightly smaller than in August (+15.8%), which given rising inflation may also indicate that some consumers are starting to cut-back on discretionary purchases.

The number of Brits who felt confident in their ability to buy non-essential items fell four percentage points in September (59%, compared to 63% in August) – the lowest this figure has been since February 2021, during the third national lockdown.

Consequently, some shoppers are already seeking out value in the purchases they make, as discount stores saw a 29.3% uplift compared to 2019. A further 56% of Brits suggest that if energy prices rise sharply, it will make it harder for them to spend money on nice-to-have items.

The rising cost of everyday items is also causing 90% of consumers to be concerned about the impact on their household finances, and in-turn those who feel optimistic about the economy has fallen month-on-month (31% in comparison to 37% in August).

However, many sectors also saw considerable growth in September, owing in part to workers returning to offices, the onset of a new school term and preparations for the winter months with home improvements and purchases of warmer clothing.

Pubs, bars & clubs benefited from a 43.5% boost as colleagues reunited at post-work gatherings, while entertainment saw its strongest growth in more than two years (+28.0%), with new film releases, gigs and theatre shows encouraging Brits back to venues.

Home improvements and DIY was up 24.1% and department stores and pharmacy, health and beauty retailers rose 3.6% and 17.5% respectively – the sharpest increases for both categories since May 2021.

Although still in decline, travel agents (-45.4%) and airlines (-49.5%) had month-on-month improvements (compared to -53.3% and -53.0% in August), as holidaymakers booked overseas trips to enjoy the end of summer.

Raheel Ahmed, Head of Consumer Products, said: “The return of pupils and workers to schools and offices helped many sectors to see strong uplifts in September. Pubs, bars & clubs and the entertainment industry benefitted from post-work socialising, while international travel was given a boost as holidaymakers jetted off to warmer climes to squeeze in their last trips of summer.

“Consumers are, however, starting to feel the impact of rising prices on their personal finances, which is also hampering confidence levels. While this is causing some Brits to seek out value in their purchases, as the festive season approaches, we expect spending to gradually gather pace as shoppers start buying gifts and preparing for gatherings with loved ones.”

Elsewhere, Carr’s, the agriculture and engineering Group, has announced that Hugh Pelham has stepped down from his role as Chief Executive Officer, leaving the group with immediate effect, and will “pursue other interests”.

Peter Page, currently chairman, has become executive chairman on an interim basis.

Page commented: “On behalf of the Board we thank Hugh for his contribution since joining at the beginning of the year. Group performance remains in line with the improved guidance provided in our Trading Update on 19 July 2021.

“We look forward to updating shareholders on the Group’s progress at the time of our Full Year results on 22 November.”

THG is today hostinging its inaugural Capital Markets Event for analysts and institutional investors, focusing on its end-to-end technology platform, Ingenuity.

In addition, the group will set out its 2030 Sustainability Strategy, and its ambitious goal to be climate positive and offset its entire historical emissions.

THG said it is acutely aware of the impact that big businesses have on the environment, and the great responsibility and influence it holds with people, communities and suppliers in the UK and internationally.

“Our sustainability goals reinforce the direction in which THG is travelling, providing a formal structure and targets underpinned by science, data and technology, and driven by our talented people all over the world,” it stated.

Matthew Moulding, executive chairman and CEO of THG, commented: “We are committing to use our global scale, our world-class talent and our dedication to innovation, to act as a force for good. More importantly, we are using our access to capital to invest in and influence environmental and societal changes that will benefit our planet today and create a sustainable future for generations to come.

“Publishing our goals is our first step, and next year we will publish our roadmaps to achieving each milestone target towards 2030. We have always been fast-paced, agile and responsive to changes in the market, and our sustainability strategy is no different - while we have our sights set on the year 2030, we will certainly do our best to achieve more and work in partnership with others to accelerate the pace of positive change.”

“Events in 2020 and 2021 have demonstrated both the immensely powerful and unpredictable nature of Planet Earth and the unity, collaboration, resilience and desire from society to build a better future. Our vision is to leave the world a better place than we found it. It will take real responsibility and commitment from every one of our people, suppliers and supporters, working in partnership to help us achieve our shared goals.”

On the markets this morning the FTSE 100 has opened down 0.7% to 7,095.9pts.

Risers include Kerry Group, up 2.2% to €115.95, Britvic, up 1.9% to 875.5p and Glanbia, up 1.6% to €13.25.

Fallers include THG, down 3.3% to 422.6p, McColl’s, down 3.2% to 22.5p and Virgin Wines, down 2.7% to 180.1p.

Yesterday in the City

The FTSE 100 started the week up 0.7% to 7,146.8pts, although there were a number of consumer fallers amid concerns of mounting inflation.

Fallers included Britvic, down 4.9% to 859p, Bakkavor, down 4.4% to 125.8p, Nichols, down 3.9% to 1,220p, Glanbia, down 3.4% to €13.05 and Kerry Group, down 2.8% to €113.50.

Online specialists were also hit yesterday with Naked Wines, down 3.7% to 669p, Just Eat Takeaway.com down 3.7% to 5,419p, Ocado, down 3.6% to 1,565.5p and THG, down 3.5% to 436.8p.

The day’s risers included McColl’s, up 3.8% to 23.2p, Hotel Chocolat, up 3.2% to 490p, Parsley Box, up 2.4% to 42.5p, FeverTree, up 1.6% to 2,471p and SSP Group, up 1% to 262.2p.