Positive retail growth masks growing levels of uncertainty

According to the data, fashion was the strongest performer in all but the final week of July, with this month’s result marking 17 consecutive months of positive LFL sales for the sector. Total fashion LFLs rose by +20.0 per cent from a base of +36.5 per cent. 

Overall, retail sales growth remained steady despite inflation and cost-of-living concerns with total like-for-like (LFL) sales, combined in-store and online, increasing by +12.4 per cent in July compared to the equivalent month in 2021. Total non-store LFL sales extended a four-month run of positive results at +4.8 per cent growth, however rates have slowed, failing to reach double digits since October last year. 

July saw a better start to the month than June, with total LFL sales growing by +9.60 per cent (compared to +4.65 per cent four weeks previously). Total LFLs increased by +11.40 per cent and +21.79 per cent in the middle of the month when a heatwave spread across the country. The final week of July saw total LFL sales increase by +15.34 per cent from a base of +29.05 per cent for the same week last year.

Total LFL sales for the lifestyle sector increased by +11.60 per cent in July. However, non-store LFLs for lifestyle recorded the ninth consecutive month of negative results, highlighting that consumer spending is rebalancing across channels following pandemic disruption.

The homewares category saw another disappointing month of results, with total LFL sales falling -6.0 per cent compared to July 2021, the fourth negative month for homewares LFL sales this year. Online sales for homeware have now declined for 10 straight months. 

Sophie Michael, head of retail and wholesale at BDO LLP, said the latest results painted a reasonably positive picture of the high street given the pressures facing consumers and retailers.

“With the summer in full swing and many embarking on their holidays, it is not surprising that sectors such as fashion have seen positive results over recent weeks,” she said.

“However, as people return from their annual leave and the cost of living continues to rise, together with a backdrop of rising interest rates, it is clear that there are significant obstacles ahead. Breaking down the results, we can immediately see that mid-market retailers are not performing as well as discounters or premium brands.  

“Retailers will need to differentiate themselves quickly, either through value or premium product, two areas which are seeing more robust results. As retailers deal with significant inflationary rises of their own, there will be increasing competition over discretionary spending. 

“As we head towards further energy bill increases and another rise in interest rates, both consumers and retailers will be looking to the government to ease cost pressures, help inspire business confidence, and lay a foundation for sustainable growth during a difficult time.”