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.
The monthly UK retail sales figures have served as something of a barometer for our course through the pandemic.
The headline figures - showing whether overall sales have risen or fallen - are interesting enough as a measure of activity. But the fate of this beleaguered sector ties into many of the pandemic’s wider themes.
Like many, retail has struggled with lockdowns - deserted highstreets have been a poignant illustration of 2020’s woes, as have queues forming outside Primark to the sound of restrictions easing.
It’s also been a focal point of our transition online. By and large, retailers with a strong online presence have succeeded at the cost of those without. Online-only retailers like ASOS and Boohoo have seen their stock soar over the pandemic. Others have rushed to catch up. My colleague, Emma-Lou Montgomery, wrote earlier this week about Next’s journey from a catalogue and then store retailer, to one which now predominantly sells online.
For the stragglers, sad reports of redundancies and store closures have been rife. Yesterday we heard that John Lewis will permanently close eight more shops, putting 1,465 jobs at risk. The British Retail Consortium estimates that UK shops have now lost £27 billion in sales during the three lockdowns, resulting in 67,000 jobs being lost last year.
In many cases, the online winners have swooped in on what remains - Boohoo has bought Debenhams and parts of Arcadia, while ASOS has acquired the latter’s flagship Topshop brand.
Much of this has been evidenced in the latest set of UK retail sales figures. Sales rose 2.1% in February, up from an 8.2% fall in January. That’s still down 3.7% on last year, before the pandemic seriously affected the UK.
Last month was another spent in lockdown, so the sorts of retailers that suffered aren’t too surprising. Non-essential retailers, whose stores remained closed for the period, generally struggled. Clothing retailers reported the largest fall - 50.4%, when compared with February 2020. Petrol stations were also hit hard, with sales falling 26.5% compared with last year.
Nevertheless, a 3.7% fall compared with last year (pre-pandemic) may look small, given the circumstances. It’s a far cry from the year-on-year 22.6% fall in retail sales over April 2020.
Much of the sector’s resilience can be attributed to online shopping.
The proportion spent online hit a new record last month, accounting for 36.1% of sales, up from 35.2% in January and 20% in February last year. Ever rising online sales figures show shoppers are getting used to life in lockdown. Likewise, retailers have grown better accustomed to restrictions. They’ve invested vast sums in their online presences and warehouse capacities.
And while the retail story of the past 12 months has largely been a grim one, there are signs of life here too.
Non-food stores provided the largest contribution to growth, buoyed by 16.2% and 16.1% rises in department stores and household goods stores, respectively. People have been spending on home improvements and garden furniture in anticipation of easing restrictions next week.
Positive sentiments here echo the findings of this month’s GFK composite index of consumer confidence, which was at its highest level in a year. It also builds on the picture painted by the latest IHS Markit/CIPS UK composite PMI figures, which showed that, like consumers, businesses were also preparing for increased activity over the coming months. Economic activity in March rose at its fastest rate in seven months.
The retail landscape has certainly been hit hard over the past 12 months, but it’s hopefully about to turn a corner. It seems clear that retail sales will leap once all non-essential stores are back open and will likely surpass October’s peak.
But it’s also a landscape that looks irrevocably changed. The shift online has been merciless in rewarding the winners and punishing the losers. Many have used the time to migrate away from the high-street, others have been forced off it. Stores like Primark, which has resisted going online, are a minority among the big players. We may rush back to the shops when first given the opportunity, but it looks likely that more of our time will be spent shopping online, for the remainder of the pandemic and beyond.
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. Tax treatment depends on individual circumstances and all tax rules may change in the future. 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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