Concerns for retailers as Christmas approaches

Retailers struggling as discounts predicted to eat into margins

 

Another month of negative sales growth has led to analysts predicting the UK high street may see further names fail in the next couple of months.

Figures from BDO’s November High Street Sales Tracker show year on year, like-for-like sales figures at mid-tier retailers down 1.7% overall despite a flurry of promotions designed to get consumers spending. Mild weather hit fashion sales, which dropped 1% on November 2010’s figures. Non-fashion slumped 3.1% and homewares was down 2.6%.

The level of promotions is on a par with the “panic sales” of 2008 and while this year’s promotions are largely more structured and considered, this is likely to have an impact on margins. The effects of a combination of reduced margins and low sales will come as retailers approach Christmas more in hope than expectation.

“Retailers will be hoping shoppers suspend austerity for the Christmas weeks to enable them to clear stock and have the cash to meet their usual quarterly obligations,” said Don Williams, National Head of Retail and Wholesale at BDO LLP.

“Throughout 2011 we’ve seen the high street polarising between high performers and strugglers,” said Williams. “The former are surviving despite the tough climate, but the latter have found failing to offer consumers high levels of service and innovative, new products at the right prices is a quick route to very quiet tills.”

Despite this, Williams urged good retailers to take heart from the fact the bottom hasn’t fallen out of consumer spending completely – shoppers will still spend if given the right incentive.

“Online sales are still growing and it will still be an “internet Christmas” for those with a well-thought out multi-channel sales offering,” he added.

The High Street Sales Tracker can be downloaded by clicking here  

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 The BDO High Street Sales Tracker analyses like-for-like spending at non-grocery retailers with annual sales of between £5m and £500m

 

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