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Uk retail prospects Jan 2012
The document discusses how we tend to overestimate change in the short term and underestimate it in the long term, advising against inaction. It then provides brief summaries of retail sales trends in the UK, including a rise in like-for-like sales in December after a November drop, growth in food but decline in non-food sales over three months, and strong non-store non-food sales growth but slowing inflation.
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Uk retail prospects Jan 2012
- 1. “We always overestimatethe 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
- 2. “The internet? Weare not interested in it.” Bill Gates 1993
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- 4. BRC Activities Lobbying Industry data and information Media management On Pack Recycling Label Global Standards Events www.brc.org.uk
- 6. The BRC-KPMG RetailSales 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 SalesMonitor: 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
- 9. BRC-Google Online RetailMonitor
- 10. The BRC-Nielsen ShopPrice 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 confidencefell 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 aquarter 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 andVacancy Monitor Where is everyone ? Out of Town 21% High Street 55% Shopping Centre 24% Source: BRC, 2011
Editor's Notes
- #2 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.
- #3 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.
- #5 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.
- #6 120 companies 60,000 product lines Range of sectors
- #7 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.
- #11 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.
- #12 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