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Retail sales volumes plunged by 2.3% in April as wet weather and cost of living constraints hit activity across the sector.

The Office for National Statistics said today that sales volumes fell 2.3% in April following a a drop of 0.2% in March.

The 2.3% drop was far in excess of expectations, with economists polled by Reuters forecasting a 0.4% drop

The ONS said that sales volumes fell across most sectors, with clothing retailers, sports equipment, games and toy stores, and furniture stores doing badly as poor weather reduced footfall.

Non-food stores sales volumes fell by 4.1% in April 2024, which was the joint largest fall (shared with December 2023) since January 2021.

Food stores sales volumes also fell for their third consecutive month, down 0.8% mainly because of supermarkets.

Automotive fuel sales volumes showed their largest monthly fall since October 2021, falling 4.9%.

Retailers pointed to the wet April reducing footfall, with the Met Office reporting that April saw 155% of average rainfall and just 79% of average sunshine hours.

More broadly, sales volumes rose by 0.7% in the three months to April 2024 when compared with the previous three months, following a poor December 2023, and fell by 0.8% when compared with the three months to April 2023.

Morning update

The upwards momentum in UK consumer confidence continued last month, with a further two-point improvement in May

GfK’s long-running Consumer Confidence Index increased two points to –17 in May, with four of its five measures up.

The index measuring changes in personal finances during the last year rose one point to –10, which is 10 points better than May 2023.

The forecast for personal finances over the next 12 months is up five points at +7, which is now 15 points higher than this time last year.

The measure for the general economic situation of the country during the past 12 months is up two points at –39 and now 15 points higher than in May 2023.

While expectations for the general economic situation over the next 12 months have increased by four points to –17, which is 13 points better than May 2023.

The only measure to fall back was the major purchase index, which was down one point to –26 and two points lower than this month last year.

Elsewhere, Poundland owner Pepco Group reported its interim results last night, with a strong rise in profits on double-digit sales growth.

Group revenue in the six months to 31 March was up 13.8% to a record €3.2bn.

However, that was largely driven by new store openings as like-for-like revenue declined by 2.5% during against what Pepco said was a strong comparative period last year.

In like-for-like terms, Pepco sales were down 3.2%, Poundland down 0.7% and Dealz Poland down 4.6%.

Instead headline growth was down to 289 net new stores opened in the period, of which 86 in the second quarter.

Despite the organic sales decline, group gross margin rose 310bp to 43.1%, driven by Pepco and in particular its Central and Eastern European business, where gross margin and store profitability have been successfully rebuilt back towards pre-pandemic levels

That saw the group deliver record underlying group EBITDA of €487m up 28.2%, driven by a 38.9% increase in EBITDA at its Pepco brand.

The group expects to deliver underlying full year EBITDA of around €900m.

CEO Andy Bond commented: “We are today reporting a solid group performance for the first half, including record revenues and a significant uplift in gross margin, reflecting good progress against strategic priorities set out last autumn.

Despite a positive fmcg contribution, Poundland’s performance was behind expectations due to challenges in implementing the significant range change to Pepco products, which we are addressing. Dealz Poland continued to make progress.

“Across the group, we made significant strides in improving gross margin in H1, which increased by 310 basis points to 43.1%. This improvement was driven by enhanced product purchasing, as well as a more normalised environment for commodity prices, foreign exchange and freight cost versus the prior year, notwithstanding some impact from the situation in the Red Sea.

“Looking ahead, while consumer sentiment in some of our key markets remains challenging, we expect to deliver underlying EBITDA for the full year in the region of €900m, compared with €753m in the previous year. We will also benefit from greater focus on disciplined capital investment, with an improvement in free cash flow generation expected in the full year. This financial strength positions us well to continue executing our growth strategy while maintaining a strong balance sheet.”

On the markets this morning, the FTSE 100 has dropped 0.5% to 8,295.5pts in early trading.

Early fallers include Just Eat Takeaway.com, down 2.9% to 1,075.8p, DS Smith, down 2.2% to 368.2p and PayPoint, down 1.8% to 534.5p.

Risers include McBride, up 2.3% to 122.7p, Glanbia, up 1.3% to €18.32 and Britvic, up 0.8% to 992.5p.

Yesterday in the City

The FTSE 100 closed down 0.4% to 8,339.23pts.

Winners yesterday included Tate & Lyle, with shares up 4.6% to 708p as it improved full-year profits and committed to returning the proceeds from sale of Primient to shareholders.

Naked Wines also continued its good run, climbing another 6.1% to 63p, while Deliveroo was up 5.3% to 152.2p and McBride rose 2.4% to 119.8p.

Bakkavor also jumped 1.1% to 134.5p as it upgraded profit expectations for the year following a return to volumes in Q1.

WH Smith led the fallers, down 5.1% to 1,108p, with Greencore giving up some gains, down 2.3% to 165.2p, and SSP Group down another 2.8% to 176.9p.

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