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July saw a small increase in sales, according to data from accountancy firm BDO, which was slowed in the second half of the month by the wet weather.

According to BDO’s latest high street sales tracker, total like-for-like sales in July grew 3.6%, compared with July 2022.

In-store LFL sales grew by 6.3% and non-store sales by 4.5%, based on the same period last year.

However, in the final two weeks of the month sales declined significantly, recording falls of 0.6% and 0.4% respectively compared with the same weeks last year.

Sophie Michael, head of retail and wholesale at BDO, said: “Although these figures highlight a small increase in sales in July, this really has been a month of two halves. The growth in the first half of the month was still below inflation rates, meaning sales volumes are still significantly down. The second half of the month saw sales going backwards, declining compared to last year.

“The first couple of weeks of July saw higher levels of discretionary spending, encouraged by some heavy discounting in the fashion sector and consumers making purchasing ahead of the schools breaking up for summer, but sales in the latter half of the month were likely dampened by more people travelling on holiday and the unseasonably wet weather.”

Following several months of bad results, the homewares sector continued to perform poorly in July, recording just 0.9% sales growth from a very low base of a 6% drop last year.

However, the fashion sector recorded modest growth, with like-for-like sales increasing by 3.0% over the same month last year. In-store fashion LFLs fell by 0.3%, dragged down by negative sales in weeks three and four of the month.

The lifestyle sector was the strongest-performing category, with total like-for-like sales growing by 7.1% this month from a base of 11.6% growth. On-store lifestyle sales were strong throughout July, promoted by pre-holiday spending, achieving some of the sector’s strongest growth since March.

Michael added: “Retailers continue to face challenging trading conditions with no signs of an immediate recovery. Having recorded poor sales growth in the final two weeks of July, retailers now head into August, when UK discretionary spending typically slows down.

“However, with data showing that the number of overseas tourists is now above pre-pandemic levels, this may offer a lifeline to retailers, particularly those in major cities who will be relying on them to make up the discretionary spending shortfall. With many retailers calling on the government to reinstate tax-free shopping for overseas visitors, this could be one way of providing a significant boost to the sector.

“Even if tourist spending boosts sales growth and volumes in the short term, retailers are now gearing up for their critical fourth quarter trading period. They have discounted heavily over the summer to support sales, which is putting huge pressure on their margins, but this is unsustainable.

“Navigating a period of high interest rates and high inflation while maintaining sales will be incredibly challenging. Now more than ever will retailers need to focus on accurate forecasting and managing their working capital and product offering in order to succeed.”

Morning update

Total UK footfall increased by 1.8% in July, according to BRC-Sensormatic IQ data, rebounding from a 1.9% drop in June.

The monthly data found high street footfall increased by 1.6% in July, up from 0.6% in June.

Retail parks saw footfall increase by 1.4% in July, up from a 2.6% decline in June, while shopping centre football recovered to 0.2% growth from a 4.2% drop in June.

Footfall at other retail locations increased by 8.6%. This was driven by increases in outlet sites.

Helen Dickinson, CEO of the British Retail Consortium, said: “July saw modest growth in footfall numbers in all locations across most major cities in the UK, with Scotland and the north east leading the way. The rainy start to the summer holidays drove many people off the streets and into the shops, in contrast to last year’s heatwave, which kept people outside in the sun.

“The recovery in international tourism continues to drive shopper numbers up in major cities. The government should capitalise on this by reintroducing a tax-free shopping scheme, as exists in all other European Union countries. This would encourage more visitors and stimulate more spending, boosting economic growth and employment.”

Andy Sumpter, retail consultant EMEA for Sensormatic Solutions, added: “Footfall saw a bounce back into positive figures in July, reversing the slowdown experienced in May and June. While retailers will welcome the uptick in shopper traffic, it will be with a sense of practical positivity.

“Many will be mindful they continue to serve a cost of living consumer, who remains cautious – and may well become more so with the prospect of further interest rates threatening spending power in the mid- to long-term. Indeed, our data shows that much of the footfall recovery in July was shored up by strong performance in outlet retail, as shoppers turn to discount formats to make spend go further.

“And this is putting further pressure on retailers, already shouldering the burden of growing price sensitivity, to turn to discounting to drive demand. Even in the context of rising price sensitivity, discounting remains just one of many levers retailers can pull. By doubling down on value-driven but experience-led propositions, retailers can build on the store’s revival as the shopping channel of choice.”

On the markets this morning, the FTSE 100 has rebounded 0.2% to 7,546.9pts.

Risers include Virgin Wines, up 5.7% to 37p, Naked Wines, up 3.1% to 70.1p, and Hotel Chocolat, up 2.4% to 112.6p.

Fallers include McBride, down 2% to 43.6p, Kerry Group, down 1.8% to 90.4p and THG, down 1.1% to 99.6p.

Yesterday in the City

The FTSE 100 fell a further 0.4% to 7,529.2pts as markets continued to react to the surprise credit rating downgrade of the US.

Risers yesterday included Bakkavor, up 4% to 103p, McBride, up 3.1% to 44.5p, Hilton Food Group, up 2.5% to 656p, AG Barr, up 2.4% to 497p and Haleon, up 1% to 325p.

Fallers yesterday included Naked Wines, down 3.6% to 68p, Nichols, down 3.1% to 1,017.5p, Ocado, down 2.6% to 861.8p, Coca-Cola Europacific Partners, down 2.5% to 58.8p and Sainsbury’s, down 1.6% to 271.2p.