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Is the summer peak the lull before the storm for retailers?
Paul Martin, UK Head of Retail at KPMG, said:
“The sun came out for retailers in July, as like-for-like sales grew 1.6% on last year. Against a backdrop of the cost of living crisis and ongoing reports of low consumer confidence actual sales are still holding up. Online retailers (non-food) also saw the benefit of warmer weather with sales growth falling more slowly, by just 3.9% on July 2021. Which is above the 3-month average decline of 7.3% and a significant jump from the 9% fall we saw in the June 2022 Retail Sales Monitor figures.
Despite consumer polls suggesting confidence is at an all-time low, this hasn’t translated to money not being spent at the tills, as consumers are determined to enjoy delayed holidays and an unrestricted summer. Pent up demand, especially for new clothes, has so far been at significant enough levels to keep the overall retail sector in relatively good health. With travel and summer socialising back on the agenda, retailers will be hoping the feel good factor continues into August.
However, the summer peak could be the lull before the storm with conditions set to get tougher as consumers arrive back from summer breaks to holiday credit card bills, another energy price hike and rising interest rates. With stronger cost of living headwinds on the horizon, consumers will have to prioritise essentials, and discretionary product spending will come under pressure. As margins continue to be challenged, and costs continuing to rise, a significant drop in demand come the autumn will have detrimental impact on the health of the retail sector. Truly understanding individual customer buying patterns and being able to differentiate these will become increasingly more important for the sector.”
