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UK retail sales volumes fell back in June at a rate not seen since the depths of the pandemic, as inflation continues to bite, and households cut back spending.

According to the BRC-KPMG retail sales monitor for June, on a total basis, sales decreased by 1%, against an increase of 10.4% in June 2021, well below the average 12-month growth of 3%.

UK retail sales decreased 1.3% on a like-for-like basis from June 2021, when they had increased 6.7%.

Over the three months to June, food sales increased 2.2% on a total basis and 1.6% on a like-for-like basis. This is above the 12-month total average growth of 0.6% and food was in year-on-year growth in June.

However, over the same three month period non-food retail sales decreased by 3.3% on a total basis and 4.2% on a like-for-like basis. This is below the 12-month Total average growth of 5.0%.

In-store sales of non-food items increased 2.2% on a total basis and 0.6% on a Like-for-like basis since June 2021.

But online non-food sales decreased by 9.1% in June, against a decline of 5.9% in June 2021.

BRC CEO Helen Dickinson commented: “Sales volumes are falling to a rate not seen since the depths of the pandemic, as inflation continues to bite, and households cut back spending.

“Discretionary purchases were hit hard, especially white goods and homeware, while consumers also traded down to cheaper brands in food and non-food alike. While the Jubilee weekend gave food sales a temporary boost, and fashion sales benefited from the summer holiday and wedding season, this was not enough to counter the substantial slowdown in consumer spending.

“Retailers are caught between significant rising costs in their supply chains and protecting their customers from price rises. The government needs to get creative and find ways to help relieve some of this cost pressure – the upcoming consultation on transitional relief is a golden opportunity to ensure that retailers aren’t overpaying on their business rates bills. Government action on transitional relief would make a meaningful difference to retailers’ costs and ease pressure on prices for customers.”

KPMG UK head of retail Paul Martin added: “Retail sales continued to slide for the third month in a row, albeit down just 1% on what was a strong June 2021 and against a backdrop of unprecedented price rises on the high street.

“As the cost living crisis continues to deepen, retailers face walking a fine line between protecting margins and further denting consumer confidence by passing on price rises whilst negotiating with their suppliers to share the cost increases. Cost and efficiency will dominate retailers’ agendas as they are forced to make some tough decisions on which products make it to the shelves in order to remain price competitive for consumers.

“With a long run of hot weather predicted and many consumers choosing to holiday at home this summer, retailers will be hoping that the feel-good factor begins to improve confidence amongst some shoppers – as presently overall confidence levels are lower than sales may suggest.”

On food and drink, IGD CEO Susan Barratt commented: “Food and drink sales fluctuated week by week in June, and with volume sales down and value sales up, we can clearly see inflation coming through. However, the overall downward sales trend for volumes means the outlook continues to be challenging, although good weather might provide a welcome boost in July.

Morning update

Consumer card spending grew 6.2% in June compared to the same period in 2021, with the entertainment, hospitality and international travel sectors all enjoying month-on-month uplifts as people enjoyed the early summer weather.

Data from Barclaycard, which sees nearly half of the nation’s credit and debit card transactions, reveals that spending on essential items increased 4.4%, largely driven by a surge in fuel spend (24.8%) as petrol and diesel prices continued to climb.

Shopping at supermarkets and specialist food and drink stores saw year-on-year decreases of -0.8% and -1.1% respectively, with almost half of consumers (49%) seeking more value from their weekly shop – an eight point rise on last month (41%).

As household bills continue to mount, spending on utilities jumped 39.6% year-on-year, representing a 5.1% increase month-on-month (34.5% in May) and leading 44% of people to cut back on their energy and water consumption to keep costs down.

Spending on non-essential items was up 7.1% year-on-year, although this was a noticeably lower level of growth than seen in May (11.6%) and April (21.2%), continuing the downward trend seen over the last few months.

However, the entertainment industry was up 5.3%, sports and outdoor retailers (4.9%) and pharmacy, health and beauty (1.9%) also enjoyed strong monthly growth, as did department stores (1.8%) and clothing retailers (2.4%), owing to consumers enjoying more time outdoors in the sunshine and preparing for summer holidays and events.

Although spending at restaurants was down -3.3% compared to June 2021, the category saw a small month-on-month uplift (0.8%), as did bars, pubs and clubs (up 0.1%).

Despite uncertainty over potential flight cancellations, travel agents (6.4%), airlines (2.8%) and hotels, resorts and accommodation (3.3%) all saw monthly growth as holidaymakers booked getaways for the summer.

Spending on household goods also saw a noticeable drop compared to May 2022 (-5.1%), with home improvements and DIY as well as furniture stores seeing month-on-month declines of -7.4% and -2.7% respectively, as Brits held-off purchasing certain discretionary items.

More of the nation (91%) than last month (88%) are concerned about the negative impact of rising household bills on their personal finances. Consumers are also feeling less optimistic about their ability to live within their means (66% versus 71% in May), and their ability to spend on non-essential items (48% versus 54%). In addition, confidence in the future of the UK economy has decreased slightly to 25%, down from 27% in May.

José Carvalho, head of consumer products at Barclaycard, said: “The continued rise in fuel, food and energy prices means consumers are having to budget and seek out value where they can for both essential and non-essential purchases.

“While this cautionary approach is impacting supermarket and individual basket spend, there are bright spots to be found, with Brits increasing their discretionary spending on entertainment, travel and takeaways as we head into high summer.”

Elsewhere, logistics player Wincanton said it has continued to make “good operational and strategic progress” and is trading in line with current market expectations despite the wider economic headwinds.

Ahead of its AGM, the supply chain group said revenue for the first quarter of this financial year grew by 11% compared to the same quarter last year, or 9% excluding the impact of acquisitions.

Growth has continued across all four sectors with each also building an “attractive” pipeline of opportunities.

The eFulfilment sector increased revenue by 17% in the first quarter including the Cygnia acquisition with operations for The White Company commencing this month on 10 July. Excluding the impact of Cygnia, eFulfilment still grew by 1% despite the slowdown in online fulfilment.

Public and industrial revenues grew 11% reflecting the full year impact of its public sector work with HMRC and further warehousing activity with Infrastructure customers.

Grocery and consumer and general merchandise grew revenue by 8% and 13% respectively.

The group said that, while it is mindful of the macroeconomic environment, it remains confident that the combination of a “robust business model, new contract wins, disciplined pricing and a strong balance sheet” means it is on track to deliver full year results in line with current market expectations.

On the markets this morning, the FTSE 100 is down 0.4% to 7,166.2pts.

Early risers include Kerry Group, up 1.2% to 96.7p, Premier Foods, up 0.9% to 109p and Virgin Wines, up 0.7% to 78p.

Fallers include FeverTree, down 4.4% to 1,260.5p, Naked Wines, down 4.3% to 160.7p and Deliveroo, down 4.2% to 90.9p.

Yesterday in the City

The FTSE 100 opened the week flat at 7,196.6pts yesterday.

Digital names were again under pressure, with THG down 6.1% to 77.1p, Ocado down 3.6% to 835.6p, Deliveroo down 2.6% to 94.9p and Just Eat Takeaway.com, down 1.8% to 1,312.2p.

Other fallers included Devro, down 2.1% to 181.2p, Hotel Chocolat, down 1.9% to 1,312p, Greencore, down 1.6% to 95p, WH Smith, down 1.3% to 1,388p, DS Smith, down 1.2% to 281.7p and Greggs, down 1.1% to 1,921p.

Risers included Glanbia, up 4.8% to €10.98, AG Barr, up 3.4% to 550p, FeverTree, up 1.7% to 1,318p, Compass Group, up 1.7% to 1,789p, Nichols, up 1.3% to 1,215p, Britvic, up 0.9% to 848p and Diageo, up 0.9% to 3,567.5p.