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Today’s retail sales figures appear at face value to be positive for the beleaguered retail sector. The top-line figure shows monthly sales have grown for the fourth month in a row. Up 0.8% since July, and up 4% overall from where they were in February pre-pandemic, you might think the retail rout was over. But delve a little deeper and the truth, as ever, is that retailing is a very mixed bag.
A trip to any high street or shopping centre of late would tell you all you need to know about the plight of the traditional ‘high street’, where the notable absence of Saturday shoppers, late night bargain hunters and office workers popping out for a lunchtime pick me up, is plain to see. And today’s numbers bear that out too. Total retail sales volumes fell by 4.8% up to August 2020 as all sectors, except for food and online retailers, saw a fall in sales.
Today, the fact that online retail sales are almost 47% higher than they were in February, before the pandemic dominated our lives, shows how fundamentally consumer shopping habits have changed. That’s not to say the odd trip to the shops is a thing of the past, but the 2.5% dip in online sales from July to August, hasn’t been converted into in-store sales either; they too fell and by a far heftier 18.2% for non-food stores overall, while clothing stores saw a 30.1% fall in sales.
One bright spot, appropriately enough for a nation of avid DIYers, came from the home improvements sector. Spending here continued to rise in August as sales volumes within household goods stores increased by 9.9% when compared with February. That should bode well for the likes of DFS Furniture and B&Q-owner Kingfisher, which are both due to post results next week.
But for every retailer getting by or even - rarely - thriving, there are plenty more who are dying. Every day we seem to hear more horror stories from the retail sector. Just yesterday, Next described the pandemic as “expensive and miserable” although the business has been "more resilient than expected", with pre-tax profits of £9 million in the first half of the year.
Then there was John Lewis posting that huge £635 million loss for the six months to July and unfortunately for its employees, announcing that they won’t be getting an annual bonus for the first time since 1953.
Yesterday, rate setters at the Bank of England left interest rates at their historic low and they did so in full agreement. That means borrowing remains cheap, but the question is whether anyone will want to spend when there are very real, and potentially highly negative, issues hovering over them. None of which are mutually exclusive either.
First of all there’s the prospect of rising unemployment, and still as yet big questions over what happens when the furlough scheme ends at the end of October. Secondly, we’ve also got Brexit and the spectre of a no-deal Brexit at the end of the year. It’s the lack of clarity over the UK's future trade relationship with the EU which could really threaten the economic recovery.
And last, but by no means least, of course we’ve got Covid itself to contend with. As numbers rise, so too does the prospect of more drastic local lockdowns or even a second nationwide lockdown.
And the impact of all, or any one of these, is likely to feed through to the retail sales figures over the next few months and crucially as we edge nearer to the all-important festive trading period.
While the next few months are shrouded in nervous uncertainty, one thing for sure is that the Christmas period will be more important than ever for retailers this year.
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 an authorised financial adviser.
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