Two weeks in retail - 8th May 2012
In the past fortnight the news has come that retailers were dreading – that the economy is officially once again in recession.
The Office of National Statistics revealed that its first quarter figures showed that GDP had fallen 0.2% for the first three months of 2012 following a fall of 0.3% for the last three months of 2011.
Although the news was a huge blow for retailer and consumer confidence alike retailers are hoping that the Bank Holiday boosts of May and June will persuade shoppers to spend.
In the grocery sector competition has been particularly tough as retailers compete for spend with shoppers rewarded this week with the news that according to the BRC-Nielsen Shop Price Index for last month food inflation slowed to 4.3% in April from 5.4% in March with overall shop price inflation down to 1.3% for the month from 1.5% in March.
The BRC said non food goods have actually now been cheaper than last year for three consecutive months.
For the May bank holiday just gone retailers were heavily promoting sales and special bank holiday offers to try to persuade shoppers to spent.
The reaction of retailers to the news of an official double dip recession was mixed. Although many believed it is the biggest blow yet to consumer sentiment Next boss Lord Simon Wolfson was one of the retailers to publicly voice his belief that the figures will be revised shortly and that the consumer was unlikely to be put off spending simply because of the word recession as the UK consumers have been tightening their belts for so long anyway.
Of course with his own announcement of total Next brand sales up 1.4% in the first quarter, Lord Wolfson could afford to be optimistic – although overall total sales at the group actually fell 3.9%.
The mood was less cheerful at Morrisons where it said a 1% fall in like for likes for the first quarter – excluding fuel – was the result of the challenging environment faced by UK consumers.
The mood continued at mixed goods retailer Home Retail Group which announced a collapse of 60% in pre-tax profits for the year to February 25 with total sales at Argos down by 7% over the year to £3.8 billion. Many analysts believe the fall was indicative of the company’s need to update its store model in the clicks and collect world of today and there had been speculation that the retailers store portfolio would be revised. However following the results chief executive Terry Duddy insisted the stores remained an integral part of the business and that a wide store closure plan was not on the cards.
Announcing that it was to close stores however was fashion brand French Connection which revealed it was to close 14 of its 71 stores following a review of its retail business. And, in a signal of how technology is changing retail, also came the revelation that Boots was to close 160 of its 520 instore photo processing labs. Both closure announcements follow hot on the heels of last month’s revelation of a much wider store closure programme for Mothercare.
The fortnight also saw the official passing of legislation that will allow the relaxation of Sunday Trading laws during the London Olympics. There had been hopes that the move would be the precursor of a wider relaxation of what some see as outdated trading laws however Mark Prisk, minister for business and enterprise, said the restrictions would continue.
Consumer confidence is undoubtedly extremely delicate and so retailers are pinning their hopes that the Queen’s Diamond Jubilee next month and the London Olympics will provide retailers with marketing and sales opportunities to boost confidence and spend in what leading business magazine Retail Week has dubbed the “summer of hope”.
Whether that turns out to be the case has yet to be seen.