While sales had already been struggling, Britain’s retailers have now been dealt another blow with figures out showing the worst January sales and footfalls in half a decade. Retail experts Springboard show footfall dropped by 1.6 per cent last month, the worst result for January since 2013, with customer numbers on high streets falling by 1.9 per cent.
Furthermore, customer spending declined by 1.2 per cent, according to Visa, the first January fall for five years.
High street spending slumped by as much as four per cent.
The decline in shopper numbers and spending has put even more pressure on a sector that is straining under the weight of costs from business rates, the national living wage and inflationary pressures.
Underscoring the difficulties faced by the industry, a report from Moore Stephens, one of the leading firms in accounting and advisory network, has found that 19 per cent of fashion retailers are showing signs of financial distress, such as delayed payments to suppliers, and large drops in revenue.
Several household names have collapsed under the pressure, with fashion chain East and furniture retailer Warren Evans both falling into administration so far this year.
With the problems at East, 314 jobs have been put at risk.
This followed on from a difficult 2017, when Deloitte recorded a 28 per cent jump in retail administration, the first rise in retail administration for five years.
Despite a rise in food sales, food retailers have also been announcing a raft of job cuts as they contend with rising costs from sterling, business rates and higher minimum wage rates.
Head of restructuring and insolvency at More Stephens, Jeremy Willmont, said retailers were facing the most difficult trading conditions since the financial crisis.“Fashion retailers have been hit by the perfect storm of rising costs, falling consumer spending and increased competition.
All three have heaped pressure onto revenue and made profit margins difficult to maintain,” he said.
Research by NatWest and consultancy Retail Economics published this month has painted a similar gloomy outlook, highlighting a tough consumer environment ahead for retailers, along with rising operating costs.
The report found almost a third of households expect their personal finances to weaken this year.
Operating costs are expected to increase by around 2.5 per cent, having risen by 2.9 per cent in 2017.
It is thought April’s rise in the national living wage will cost the industry £1.5bn.
However, the burden of business rates, which comprise around nine per cent of all operating costs, will ease slightly this year when the government brings forward plans to switch from RPI (Retail Prices Index) to CPI (Consumer Prices Index) indexation for the planned rate rise In April.
Nonetheless, with costs mounting amid a dreary domestic outlook, businesses would have been looking to capitalise on a shopping bonanza over the Chinese New Year last week, the biggest event in the Chinese calendar.
Data from Forward Keys has forecast an eight per cent rise this year in Chinese tourist numbers with their usual high spending shopping spree to boost sales figures, as expected by retailers.
Stores continued to cut prices on non-food items last month, as the trend for discounting on the high street failed to abate.
Shop prices fell by 0.5 per cent in January, with non-food prices down by as much as 1.9 per cent, according to data from the British Retail Consortium (BRC). Food prices, however, were still inflationary, rising by 1.9 per cent year-on-year, the highest rate of inflation since October 2017.
Chief executive of the BRC, Helen Dickenson, said: “The fall in shop prices eased off marginally in January but remained in deflationary territory for the 57th consecutive month.” She added: “It was the same story of divergent price movements for food versus non-food categories from the previous months, albeit with non-food prices creeping ever so slightly towards inflation.” Looking back, many retailers — especially non-food retailers — failed to cash in over the Christmas period.
Head of retail at KPMG, Paul Martin, said that January was a “tough gig” for retailers and there was little growth in sectors other than food.“Bigger ticket items such as furniture traditionally rely on strong post-Christmas trade, but this year seem to have struggled to woo consumers with the lure of a sale sign in the window,” he said.
(The author is our foreign correspondent based in the UK. He can be reached at andyjalil@aol.com)
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