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Market Commentary

​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​Weekly Retail & Leisure News - 21 August, 2017

Stronger spending on food to boost UK retail sales

The volume of retail sales grew 1.3% YoY in July, and 0.3% compared with June, according to the ONS. The rise in overall sales was a result of stronger spending on food, where volumes were up 1.5%. This rise in food sales compensated for a drop in the purchase of nearly all other goods, as all sectors apart from food and household goods saw a fall in volumes in July. The figures are supported by retail sales data from the BRC, where food LFLs rose 2.3%, while non-food LFLs fell 0.7% over the quarter to the end of July. Retail LFLs were up 0.9%, compared to 1.1% last year. The BRC described the July figures as “fairly solid”, considering the strong sales in July last year. Inflation continues to affect retail sales. However, the rising food and clothing costs were offset by falling petrol prices, and July’s inflation rate stayed at 2.6% YoY, the same rate as previous month. The rise in food sales were also reflected in recent data from Nielsen, revealing that total grocery sales increased 5.1% YoY in the four weeks to July 15. Boosted by major sporting events in July, all of the UK’s major grocers saw rising sales during that period for the first time since July 2013. Asda was one of the winners this quarter, with LFLs up 0.7% in Q2 to June 30, after removing the benefit of Easter. Including Easter, total sales rose 1.8%.

Furniture retailer DFS warns of a challenging UK market ahead as sales fell 4% YoY in the half-year to July. It said that the shaky economic climate has led to a decline in footfall, as consumers avoid purchasing non-essential, big-ticket items such as sofas. Further signs of a challenging market was also evident at Australian DIY retailer Bunnings Warehouse who reported sales of £1.2bn in the year to June 30, while Q4 revenues fell 6.8%. Losses before inflation and tax totalled £54m in the year. Bunnings acquired Homebase in February last year, and losses included one-off transition and restructuring costs. Lastly, LFLs at B&Q owner Kingfisher dropped 4.7% in Q2, while sales dropped 8%. In the UK, sales at B&Q fell 7.8%, due to a strong comparison with last year. However, sales at Screwfix rose 10.8%, helped by new specialist ranges and its digital capability.

Finally, footfall dropped 1.1% YoY in the four weeks to July 29, according to the BRC. The fall was driven by a 2.1% decline in high street footfall and a 1.3% drop in shopping centres footfall. July also saw a 0.5% drop in footfall post 5pm, which could be a sign of slowing leisure spend. An exception to the overall decline was seen at Westfield Stratford City, which attracted 1.2m visitors in the week to August 14, during the World Athletics Championships, the highest footfall since the London 2012 Olympics. Retail warehouse parks also saw a positive trend, as footfall rose 1.7%.

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