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Uk retail prospects Jan 2012
1. “We always overestimate the change that will
occur in the next two years and underestimate
the change that will occur in the next ten. Don’t
be lulled into inaction.”
Bill Gates
4. BRC Activities
Lobbying
Industry data and information
Media management
On Pack Recycling Label
Global Standards
Events
www.brc.org.uk
5.
6. The BRC-KPMG Retail Sales Monitor
In December, retail sales increased by 2.2% on a like-for-like basis, after falling 1.6% in November. Total retail
sales were up by 4.1%. Excluding Easter distortions sales performance was the best since January.
BRC-KPMG Retail Sales Monitor: Like-for-Like and Total Sales
8.0
6.0
4.0
2.0
0.0
-2.0
-4.0
-6.0
May-09
May-10
May-11
Aug-10
Nov-10
Nov-11
Nov-08
Aug-09
Nov-09
Aug-11
Feb-09
Feb-11
Feb-10
Like-for-Like Total
Source: BRC
7. BRC-KPMG Retail Sales Monitor: 3-month average
In the three months to December, non-food sales fell by 1.2% while food sales grew by 2.1%. After taking into
account inflation volumes fell.
5.0%
4.0%
% change year-on-year
3.0%
December
2.0%
Food 2.1%
1.0%
0.0% All sales 0.2%
-1.0%
Non-food -1.2%
-2.0%
-3.0%
Mar- May11
Nov - Jan10
Jan - Mar10
Mar - May10
May - Jul 10
Nov- Jan11
Jan - Mar11
May - Jul 11
Jul - Sep10
Sep - Nov10
Jul- Sep11
Sep-Nov11
Sep - Nov09
Source: BRC
8. The BRC-KPMG RSM: Non-food, non-store
The BRC-KPMG non-food non-store indicator reported annual sales growth of 8.6% in November. Sales were
driven by widespread discounts and promotions. Online sales currently account for eight per cent of overall retail
sales.
BRC-KPMG Retail Sales Monitor: Non-food, non-store sales
35.0
30.0
25.0
20.0
15.0
10.0 8.6% year-
5.0 on-year
0.0
Nov-08
Nov-09
Nov-10
Nov-11
Feb-09
May-09
Aug-09
Feb-10
May-10
Aug-10
Feb-11
May-11
Aug-11
Non-food non-store
Source: BRC
10. The BRC-Nielsen Shop Price Index
The BRC-Nielsen Shop Price Index fell to 2.0% in November from 2.9% just six months earlier. Food inflation
slowed to 4.0%, from 5.7% in June, while non-food inflation remained at 0.8% from the previous month.
BRC-Nielsen Shop Price Index
12.0
10.0
% change year-on-year
8.0
6.0
Food: 4.0%
4.0
Overall: 2.0%
2.0
0.0 Non-food: 0.8%
-2.0
-4.0
Jan-09
Jul-11
Jan-08
Jul-08
Jul-09
Oct-09
Jan-10
Jul-10
Oct-10
Jan-11
Oct-11
Oct-08
Apr-09
Apr-08
Apr-10
Apr-11
Overall SPI Food Non-food
Source: BRC-Nielsen
11. Consumer Confidence
Consumer confidence fell in December to its lowest level in almost three years when the economy was in
recession. The climate for major purchases index worsened while consumers became more pessimistic about the
UK’s general economic situation over the coming year. Confidence is likely to remain weak for some time to
come.
20
10
0
-10
-20
-30
-40
-50
Jun-07
Jun-08
Jun-09
Jun-10
Jun-11
Mar-08
Dec-08
Mar-09
Dec-09
Mar-10
Sep-10
Mar-11
Sep-11
Sep-07
Dec-07
Sep-08
Sep-09
Dec-10
Dec-11
Main index Major purchases Future savings
Source: GfK NOP Consumer Confidence
12. Consumer Confidence
Over a quarter of GB Shoppers claim not to have any spare cash
“I have no spare cash”
35%
33% 32%
31% 30%
29% 28%
27%
27% 26%
25% 24%
23%
23% 22%
21%
21% 19% 19%
19%
17%
15%
Q1 2009
Q2 2009
Q3 2009
Q4 2009
Q1 2010
Q2 2010
Q4 2010
Q2 2011
Q3 2011
Q3 2010
Q1 2011
Source: Nielsen
13. BRC/Springboard-ATCM Footfall and Vacancy Monitor
Where is everyone ?
Out of Town
21%
High Street
55%
Shopping
Centre
24%
Source: BRC, 2011
Editor's Notes
Clearly, the outlook for the retail sector is unsettling. Throughout the recession trading conditions have been tough and resulted in some high-profile casualties but it ’ s fair to say that many expected worse. Actions taken by the previous Government and the Bank of England, notably record low interest rates and loose fiscal policy, have underpinned retail sales over the past 18 months. However, these economic stabilisers will soon have to be unwound On the fiscal side, the increase in VAT and NIC are already on the horizon. The Spending Review provided a more accurate backdrop to the severity of spending cuts, but the previous fall in consumer confidence suggests households already braced themselves for the repercussions. We fear that consumer confidence may not hit a low point until the second half of 2011 when some cuts have been implemented, there is more clarity about others and consumers have had a chance to react. In the Comprehensive Spending Review it was announced 490,000 public sector workers may lose their jobs – all things remaining equal – this could push the unemployment rate towards 9%. Economic recovery is further complicated by a backdrop of persistently high levels of inflation and the prospects of a rise in interest rates. CPI has now been above the Bank of England ’ s target for eight consecutive months, 3.1% in September. High UK inflation can be attributed to a number of temporary factors such as changes in the rate of VAT, past falls in exchange rates and volatile commodity prices - particularly oil.
Clearly, the outlook for the retail sector is unsettling. Throughout the recession trading conditions have been tough and resulted in some high-profile casualties but it ’ s fair to say that many expected worse. Actions taken by the previous Government and the Bank of England, notably record low interest rates and loose fiscal policy, have underpinned retail sales over the past 18 months. However, these economic stabilisers will soon have to be unwound On the fiscal side, the increase in VAT and NIC are already on the horizon. The Spending Review provided a more accurate backdrop to the severity of spending cuts, but the previous fall in consumer confidence suggests households already braced themselves for the repercussions. We fear that consumer confidence may not hit a low point until the second half of 2011 when some cuts have been implemented, there is more clarity about others and consumers have had a chance to react. In the Comprehensive Spending Review it was announced 490,000 public sector workers may lose their jobs – all things remaining equal – this could push the unemployment rate towards 9%. Economic recovery is further complicated by a backdrop of persistently high levels of inflation and the prospects of a rise in interest rates. CPI has now been above the Bank of England ’ s target for eight consecutive months, 3.1% in September. High UK inflation can be attributed to a number of temporary factors such as changes in the rate of VAT, past falls in exchange rates and volatile commodity prices - particularly oil.
The BRC is the voice of a diverse industry employing 3 m very diverse people and representing 8% of the UK economy. Our major task is to represent the views of the retail sector to the Government – UK, its devolved administrations and local councils, at the EU and international level, to the regulatory authorities, to the media and the public. We shape public policy and ensure new legislation and regulation take account of business needs. We speak out for our customers when officialdom fails to understand the impacts of their plans. We provide industry data and statistics that the Bank of England relies on in managing monetary policy.
120 companies 60,000 product lines Range of sectors
Pre-election uncertainty has given way to post-Budget anxiety. The effect of tough Budget measures on personal finances and households’ incomes will take some time to become apparent – yet consumer confidence has already started to decline. According to GfK, consumer confidence has fallen in all but two months of 2010. The expectation of large public sector job cuts and higher taxes – notably the increase in VAT and NIC – will hit consumer spending. Lacklustre wage growth and the recent reversal in house price gains will inevitably accentuate consumers’ pessimism and subsequently depress household spending. Clearly, the outlook for the retail sector is challenging. Throughout the recession trading conditions have been tough and resulted in some high-profile casualties but it’s fair to say that many industry observers expected a worse outcome. Actions taken by the previous Government and the Bank of England, notably record low interest rates and loose fiscal policy, have underpinned retail sales over the past 18 months. However, these economic stabilisers will soon begin to be unwound.
Inflation, as measured by our shop prices index continues to move through a period of volatility with a number of opposing forces of varying magnitude exerting pressure on the overall index. The main source of upward inflationary pressure continues to come from three main sources: the reversal of the VAT cut, past falls in the exchange rate and a rise in commodity prices – while weak demand that persists in the economy continues to weigh down on inflation. Retailers continue to use discounts and promotions in order to drive sales, with promotions currently at an all-time high. 37% of FMCG sold are on promotion according to Nielsen. The BRC ’ s central estimate is that shop price inflation will remain fairly stable for the remainder of the year, providing there are no major supply shocks and foreign exchange markets do not suffer from sustained and prolonged volatility.
The latest GfK consumer confidence measure fell back in September after a surprise rise in August. All components except spending plans fell back, having picked up in August. Expectations for the economy over the next 12 months fell the most. Consumers are choosing to save what spare cash they have as confidence remains fragile. The latest (August) Asda Income Tracker reported the following: The average UK household had £175 a week of discretionary income. This is a fall of £5 per week on a YOY comparison
