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Market Commentary

​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​Weekly Retail & Leisure News - 25​​ April, 2017

Easter footfall up thanks to mild weather​​​​​​

​Retail sales volumes rose 1.7% in March YoY, according to the ONS. This is a positive boost for the sector given the difficult trading environment, as rising inflation and living costs has stagnated wage growth. Retailers also enjoyed a boost over the Easter weekend, as sales volumes increased 12% YoY. Online shopping was up 26%, while in-store sales rose 14% YoY. Sales were driven by experience based shopping, casual dining and the milder weather. High street footfall increased 1.2% over the Easter weekend, driven primarily by leisure.

Last week, announcements from two of the UK’s leading department stores provide more evidence of structural change in the sector. Debenhams and House of Fraser both announced store revamps to meet consumer demands for “experience” led shopping. Following rising LFLs of 0.9% and a jump in profits to £3.4m from £1.3m the previous year, House of Fraser aims to turn its shops into a “lifestyle-led experience”. It also has plans to introduce more services and restaurants to its stores. LFLs at Debenhams rose 3% in the six months to March 6. However, a 6.4% fall in half-year pre-tax profits to £88m, led Debenhams to announce a turnaround strategy aiming to boost its appeal as a "destination" shop. Debenhams will also upgrade its online and mobile platforms.

Finally, Tesco has recorded its first positive full year growth in seven years, as LFLs rose 0.9% in the year to the end of February. Group operating profit rose 30% to £1.28bn. Sales were helped by lower prices and better customer service. Tesco, who is the UK’s biggest grocer with 28% market share, has lost customers to discount grocers such as Aldi and Lidl in recent years, and is also affected by new competition from online operators like Amazon. In the last 12 months, Tesco has made some significant changes to its property portfolio. The grocer enlarged the proportion of its stores under freehold ownership to 51%. Annualised rental savings from these acquisitions is around £152m, a significant contribution to the £226m in cost savings attained by the grocer.​

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