The retail sector is grappling with its fifth successive month of declining sales, according to the latest data from BDO’s High Street Sales Tracker. Like-for-like sales have plunged by 1.3%, marking a concerning trend that spans both the pre-Christmas period, traditionally a peak for retailers, and the subsequent stock clearance phase in the new year.
One of the major challenges highlighted by retailers for the next six months is the soaring operating costs, including the burden of borrowing. The fashion segment, in particular, has been hard hit, witnessing a significant 4.8% decline in sales.
Sophie Michael, Head of Retail and Wholesale at BDO, remarked on the unprecedented nature of the current downturn: “This prolonged stretch of negative sales resembles the bleak performance we witnessed during the 2020 COVID-19 lockdown, when many non-essential retailers were shuttered.”
While online sales saw a modest uptick of +2.9% compared to the previous year, in-store sales took a substantial hit, plummeting by -2.0%. The fashion and homewares sectors bore the brunt of the decline, with like-for-like sales dropping by -4.8% and -4.1% respectively. In-store sales for fashion suffered an even steeper decline of -8.2%.
BDO’s bi-monthly survey of mid-market businesses further underscores the mounting challenges faced by the retail and wholesale sector. A staggering 69% of businesses identify high operating costs and borrowing expenses as their primary concerns for the foreseeable future, surpassing worries about supply chain disruptions or skills shortages.
Michael emphasized the urgent need for adaptation in the face of adversity: “Retailers are grappling with a convergence of factors, including diminishing consumer spending in discretionary categories and escalating operational expenses. Those reluctant to evolve and align their business strategies with evolving consumer preferences risk vulnerability.”
The upcoming budget announcement presents a critical juncture for the retail industry, with stakeholders hopeful for targeted support measures to alleviate the sector’s woes. The recent spate of retail closures underscores the imperative for decisive action to safeguard the industry, which contributes over £110 billion in revenue and sustains nearly three million jobs.
As the retail landscape continues to evolve, stakeholders must remain agile, embracing innovation and reimagining traditional business models to thrive in a challenging environment. The coming months are likely to witness further industry consolidation and strategic acquisitions as retailers navigate the turbulent terrain ahead.
