BDO’s monthly high street tracker is always an interesting read for anyone watching UK retail but this month it’s even more interesting because it’s bleak – very bleak.
In a country with a strong economy, BDO has recorded yet another year-on-year drop in sales and is talking about a “financial winter” for stores.
And the reason? Well, wet and windy weather has taken its toll. But for the main cause, step forward Brexit. Not only was £77bn pulled out of the UK currency in the six months to April (compared to just £2bn in the previous half year) but monthly sales have fallen every month apart from clearance sales time in January since October last year.
So what has this all meant for retail? BDO’s High Street Sales Tracker for May recorded a 1.9% year-on-year drop. People are nervous about the economy and in such times their purses snap shut.
Now 1.9% may not sound like a lot but taken as a single monthly drop, it is (just imagine the cumulative effect of that figure repeated for a whole year). And 1.9% is key too because it eats into margins and means retailers are more likely to cut prices to spur sales, thus further eroding margins.
But 1.9% means that people are still spending billions in the UK, of course. So what are they buying? Big-ticket items, it seems. A 1% May rise in homewares reflects both pent up demand and price promotions. That means sofas, fridges, TVs and all the items that (hopefully) make their homes more pleasant havens in tough times, understandable given that they don’t seem to be eating out.
In a month when sales dropped 1.9% overall, a 1% rise in one category means a steeper drop for others. BDO said ‘lifestyle’ sales (that includes fashion) dropped 2.4%. Consumers aren’t buying so many T-shirts, jackets, handbags and dresses compared to the same month a year ago.
That’s not entirely down to Brexit as I said earlier. The weather simply hasn’t played ball for much of the year. When spring and early summer drops appeared on the shelves, it was too cold, windy and wet for many of us to take an interest. And by the time the weather warmed up, much of the spring and early summer offer was marked down.
Let’s hope the UK gets back to normal with a Remain vote isn the June 23 referendum. If we don’t and vote instead for Brexit, the world as we know it isn’t going to collapse. But it will mean a lot of uncertainty, some tough negotiations with our understandably irritated (former) EU partners and potential recession. And none of that is good news for fashion retail.