Retail outlook tough as sales fallThursday, 28 May 2009
The resulting balance of -17% was close to retailers’ expectations (-15%) and, other than last month’s broadly flat figure of +3%, was the least negative figure since June 2008 (-9%). A similar decline in sales is expected in June (-20%).
Sales for the time of year were reported to be poor by a net 36% of retailers, though they have slightly less negative expectations for June (-20%). The three-month moving average of sales volumes, which smooths out monthly peaks and troughs, remained weak (a balance of -19%) but was the least negative figure for nearly a year (-16% in June 2008).
A balance of 24% reported a year-on-year fall in orders placed upon suppliers and, other than in April (-11%), this is the least negative since June 2008. The balance of +8% of firms saying stocks were more than adequate to meet demand is the lowest since June 2007 (+6%).
The quarterly questions showed that employment conditions remained difficult in May, with a balance of 29% reporting that they had reduced their headcount. Though weak, this was less negative than February, when the lowest balance for employment was recorded since the survey began in 1983 (-49%).
Retailers reported that prices rose in the year to May at the slowest rate for nearly three years, with this quarter’s balance (+12%) the lowest since August 2006 (+12%). A similar rate of price inflation is expected in August (+15%).
When asked about the general business situation facing retail, the balance of firms expecting it to deteriorate (-8%) was the least negative since November 2007 (a balance of -1%).
Ian McCafferty, the CBI’s Chief Economic Adviser, said: “Businesses of all types are looking to reduce stock levels during the recession, to adjust to lower demand and to improve cashflow. Retailers’ efforts appear to be having an impact, with stock levels lower relative to expected demand, which should help improve conditions along the supply chain.
“Retailers are less pessimistic about their general business situation, and the decline in demand now appears to be slowing compared with the turn of the year. However, with unemployment still rising, conditions will remain tough.”
Among the retail sectors, one reported positive sales growth in May was for footwear & leather – although sales grew for both at a slower pace than in April.
Andy Clarke, Chairman of the CBI Distributive Trades Panel, and Chief Operating Officer of Asda, said: “Conditions were tough again in May for retailers, proving April’s better sales figure was a temporary blip. Trading conditions are expected to remain difficult in June. As for much of this year, supermarkets and shoe shops were the ones seeing decent growth. The harsh reality is consumers need good reason to part with their hard-earned cash. Demonstrating you offer value for money as a retailer has never been more important, and marks out the true survivors.”
The CBI is the UK's leading business organisation, speaking for some 240,000 businesses that together employ around a third of the private sector workforce. The organisation is also the UK's official business representative in the European Union, which generates more than 50 per cent of regulation affecting British firms. With offices across the UK as well as in Brussels, Washington and Beijing, the CBI coordinates British business representation around the world.
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