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07 June 2011

Sales drop signalled tough trading in May

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High Street Harrow Small for web

The value of UK retail sales dropped 2.1 per cent in May compared with a year ago.

Latest figures from the British Retail Consortium’s (BRC’s) Retail Sales Monitor also revealed a difficult month for electricals. TV sales, said the BRC, were particularly tough compared with the World Cup trade enjoyed by the sector in May 2010.

Sales of white goods held up, largely thanks to replacement purchases. The performance of small appliances was mixed with, again, practical kitchen and cleaning products proving more popular.

Although trade for computers and peripherals were generally mixed and deal driven, iPads and tablet devices continued to sell well, the BRC said.

Although non-food, non-store sales (those conducted over the internet, by mail-order or by phone) were 10.4 per cent higher than a year ago, growth was slowing compared with April’s 13.7 per cent rise and the 21.9 per cent boost enjoyed in May 2010.

About the figures as a whole, BRC director-general Stephen Robertson said: “After two previous months distorted by the later Easter and extra bank holiday, this is a more realistic reflection of how tough conditions on the high street really are.”

At KPMG, which helps to compile the BRC’s figures, head of retail Helen Dickinson added: “For the first time in a number of months we have a clearer picture of the underlying trend without the distortions of the timings of Easter and bank holidays, and it doesn’t make for happy reading.”

She revealed that virtually all non-food sectors saw a drop in like-for-like sales. “This, combined with falling margins driven by a greater focus on price, lower average transaction values and increasing manufacturing costs is leaving many retailers coping with a ‘double whammy’ impact on cash flows.”

As the BRC’s figures relate to sales values, not volumes, Mr Robertson pointed out that the VAT rise is flattering sales figures for most non-food goods. On top of that, renewed weakness in the housing market, he said, was making life particularly difficult for retailers selling furniture and household goods.

“This new evidence of weak spending shows how important it is to support this soft patch in the recovery by keeping interest rates low,” he added.