BDO urges margin focus after July sales

Retail sales in July narrowly missed falling into negative territory but only through widespread discounting which inevitably will hit margin and retailers' profits, according to figures by BDO LLP.

Despite stores’ attempts to lure in shoppers with extended sales that offered discounts as high as 70 per cent, BDO’s monthly High Street Sales Tracker (HSST) recorded no growth (0 per cent) in overall year-on-year sales for July.

Garden centres have recorded a positive month in what is one of the quietest times of the year, but half price sales on items such as garden furniture and plants at garden centres such as Wyevale have helped incomes. Weather in July has helped garden centres, with average England temperatures 0.5C up and rainfall 62 per cent of the average, though Scotland, Wales and Northern Ireland were cooler and wetter.
The BDO figures confirm a sixth successive month without growth for Britain’s retailers. In contrast, garden centres saw sales increases of up to 20 per cent in May, although other peak months have generally been flat or worse.

Overall sales of fashion goods for the month were down one per cent compared to July 2015 say BDO. Following one of the wettest Junes on record, stores were forced to sacrifice margins in a bid to increase sales volumes and clear warehouses piled high with summer stock.
Homewares sales grew by 4.7 per cent and sales of lifestyle goods crept up by one per cent - the sector’s strongest performance in four months.

Non-store sales rose by 21.7 per cent, the strongest performance in 2016 so far, and the sector’s best performance since September 2015. In stark contrast to bricks and mortar sales, some fashion retailers reported double – or even triple – online growth in July, and a high proportion of homewares and lifestyle retailers also saw strong online sales growth, again achieved through deeper discounts and promotions being offered online.
BD retail and wholesale head Sophie Michael said retailers would need to focus on their margins now the discounting period had finished: "The challenge for stores over the next couple of months will be to keep new stock on sale at full price for as long as possible. Retailers will be looking at opportunities to increase margins in the post-referendum marketplace, such as possible changes to their supply chains and sourcing models and exploring the export market.
"But such changes to their businesses take time to assess and implement, particularly when there are still so many uncertainties ahead. It is important that businesses stay flexible and vigilant to enable them to deal with challenges but also grasp opportunities that will arise in these changing times."

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