Important information: The value of investments and the income from them, can go down as well as up, so you may get back less than you invest.

UK consumers probably spent more on eating and drinking at bars and restaurants in August as they cut their spend on groceries and department store goods according to data out today.

Falling food store sales volumes (-1.2%) contributed to retail sales being 0.9% lower overall than in July. Department store sales were 3.7% down on the previous month. Sales overall were 4.6% higher than in February 2020 just before the pandemic struck1.

The Office for National Statistics (ONS) says the fall in food sales last month may have been associated with an increase in social spending linked to the further lifting of hospitality restrictions since July.

These findings broadly concur with a report from Barclaycard earlier this month, which said spending in bars, clubs and pubs grew at its fastest rate in over 17 months in August, even as two thirds of consumers reported being concerned about everyday items becoming more expensive2.

However, the official overall drop in sales last month may also suggest the economy has hit a soft patch as supply chain disruptions and price rises limit the release of pent-up demand.  

Retailers operating in vastly differing marketplaces provided investor updates this week and the news was generally good.

JD Sports Fashion reported record profits before tax and exceptional items of £440 million in the six months to 31 July, amid strong demand for branded sports apparel as its stores reopened after lockdown. JD Sports anticipates pre-tax profits of £750 million for the full year3.  

Meanwhile, department store survivor John Lewis Partnership swung to a profit excluding the costs of store closures and redundancies over the same half year period. While Waitrose predictably continued to deliver sales growth – up 2% on 2020 – the rest of the group performed even better, growing revenues by 12%. Three quarters of sales were made online4.

Lockdown winner Ocado reported a modest 1.8% fall in sales during the first six weeks of its third quarter before a fire at one of its customer fulfilment centres led to a 10.6% fall in revenues for the quarter as a whole. Not a bad performance on a comparative basis, bearing in mind sales surged 54% in the same period last year5.    

Finally, stock market newcomer Made.com, the online home furnishings retailer that floated in June, announced revenues grew by 61% in the first half of this year. Losses narrowed to £10.1 million from £15.2 million in the first half of 20206.  

While price rises and temporary product shortages may continue to crimp overall retail sales in the near term, the outlook for non-food retailers can be expected to improve further from here, as people regain confidence and progressively revert to their former consumption habits.

Consumer firepower increased during the pandemic, with household savings at a near record level of 20% at the end of June7. Wealth effects are also favourable, with rising house prices likely to increase consumers’ propensity to spend.

Source:

1 ONS, 17.09.21
2 Barclaycard, 07.09.21
3 JD Sports Fashion, 14.09.21
4 John Lewis Partnership, 16.09.21
5 Ocado Group, 14.09.21
6 Made.com, 14.09.21
7 ONS, 30.06.21

Important information: Investors should note that the views expressed may no longer be current and may have already been acted upon. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to a Fidelity adviser or an authorised financial adviser of your choice.

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