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The rising cost of living has “crushed” consumer confidence and put the brakes on consumer spending, according to the latest figures from the BRC-KPMG Retail Sales Monitor.

The research found total UK retail sales decreased by 0.3% in April, against an increase of 51.1% in April 2021, which is well below both the 3-month average growth of 3.2% and the 12-month average growth of 6.4%.

On a three-year basis, total retail sales remain up 3.9% during April compared with the same month in 2019.

However, overall like for like sales decreased 1.7% from April 2021, when they had increased 39.6%.

Over the three months to April, food sales decreased 1.8% on a like-for-like basis and 1.3% on a total basis, well below the 12-month total average growth of 0.7%.

Notably, though, for the month of April, food was in growth year-on-year.

Over the three-months to April, non-food retail sales increased by 1.8% on a like-for-like basis and 6.9% on a total basis. The category was back in decline year-on-year in April.

In-store sales of non-food items grew 59.3% over the three months to April, but remain down 48.2% on a three year comparative basis.

Online non-food sales decreased by 13.9% during April, compared with growth of 11.3% in April 2021.

BRC CEO Helen Dickinson commented: “The rising cost of living has crushed consumer confidence and put the brakes on consumer spending. Sales growth has been slowing since January, though the real extent of this decline has been masked by rising inflation. Big ticket items have been hit hardest, as consumers reigned in spending on furniture, electricals and other homeware; compounded by delays on goods coming from China.

“Meanwhile, thanks to the April sunshine, garden goods and fashion saw stronger sales, particularly occasionwear as consumers prepared for summer and this year’s wedding season.

“Customers face a difficult year; with the Bank of England predicting inflation to reach more than 10%. Retailers are experiencing higher costs as a result of rising commodity prices, transport costs, labour shortages, delays at ports, and the war in Ukraine. Further headwinds are incoming, such as rising global food prices, which rose 13% between March and April. Retailers will continue to do all they can to mitigate the effects of these costs rises, but unfortunately they cannot absorb them all.”

Paul Martin, UK head of retail at KPMG, added: “The cost of living crisis came home to roost for retailers in April, with sales growth going into decline for the first time in 15 months.

“Sales of clothes and footwear continued to see growth on the high street and online, but conscientious consumers curbed unnecessary spending with technology and items for the home bearing the brunt of spending cutbacks. Food and drink bounced back with 3% growth in April – largely due to Easter falling later this year.

“With interest rates and inflation rising and the Bank of England warning of a possible recession, the squeeze on disposable household income is starting to have an impact on the high street. Against a backdrop of falling consumer confidence, the retail sector has a bumpy time ahead as they face spiralling cost pressures from all directions. Many retailers will have no choice but to raise prices to protect margins, but the longer we see high inflation and real household incomes falling, the more likely it is that consumers will change their spending behaviour, prompting a decline in the health of the retail sector and possibly more casualties on the high street.”

IGD CEO Susan Barratt, commenting on the performance of the food sector, added: “Supported by holiday spending for Easter, at first glance food and drink sales performed well in April. However, with mis-matched dates for Easter, plus our emergence from the 2021 lockdown when grocery sales were unusually elevated, it’s difficult to draw firm conclusions. However, there’s no doubt the sector is operating against a backdrop of rising inflation, which reached a 30-year-high in April and is creating an unprecedented set of challenges.

“IGD predicts that inflation is likely to peak higher and last longer than official forecasts. Therefore, shoppers will face severe financial pressures for at least the rest of the year, especially as they contend with the full effect of the rise in the energy price cap.”

Morning update

Ingredients supplier Treatt has posted strong sales growth in the first half of its financial year, although profit margins slid back.

Revenue for the six months to 31 March grew by 9% to a record of £66.3m.

Over the last two years, first half revenues have grown by 23.7% with growth derived from each of the group’s product categories.

It said it had delivered material revenue growth in citrus, the group’s largest category by revenue, with the second and third largest categories, synthetic aroma and herbs, spices & florals, also performing particularly well.

These three categories grew by a combined 17% over the comparable prior year period. This performance reflected both post-pandemic re-opening of on-trade channels together with some material new business wins.

However, profit before tax (excluding a net exceptional gain of £2.6m) fell by 38.9% to £6.3m as gross margins contracted.

Treatt said gross profit margins were lower in the at 27.5% down from 35% reflecting the COVID-19 impact on its profit weighting last year. Alongside the growth in serving customers’ retail channels, the first half of last year also saw some very significant new product launches which further skewed the comparable prior year period’s performance.

It expects normal seasonality to return this year, driven by Spring/Summer beverage consumption in Northern hemisphere.

Meanwhile, strong anticipated growth in healthier living categories expected to drive higher margins.

With the order book at record levels, being up by more than 25% as compared with a year ago, the group said there remains strong momentum building for the second half.

Consequently, the board is confident that the pipeline of orders and opportunities will result in revenue growth for the full year now exceeding 15% and that profit before tax and exceptional items for the current financial year will be in line with the current market consensus of £21.7m.

CEO, Daemmon Reeve, said: “We continue to grow our revenue and have a very strong order book going into the second half of the financial year. The momentum we have in the business underlines the importance of the significant benefits we expect to gain from both investment in our people and the increased capabilities and capacity we will unlock from our new UK facility at Skyliner Way.

“Our established business model and track record of managing the input costs of our natural products has meant that we continue to deliver outstanding service for our customers and healthy returns for our shareholders, despite supply chain and other macro headwinds.

“Branded beverages are seen as affordable luxuries, and so we are well insulated against rising inflationary pressures and our strong order book gives us confidence that we are on track to perform in line with expectations for the full year.”

Elsewhere, NWF Group, the specialist distributor of fuel, food and feed across the UK, has upgraded its earnings expectations for the current year to 31 May.

The group continued to experience exceptional trading conditions in the Fuels business, with very significant short-term volatility in oil prices and a supply constrained UK fuel market.

As a result, performance during the final quarter of the year, to date, has been materially stronger than anticipated with the full year result now likely to be significantly ahead of the board’s previously upgraded expectations.

On the markets this morning, the FTSE has regained 0.7% to 7,263.3pts.

Risers include Just Eat, up 3.8% to 1,650.6p, Deliveroo, up 2.9% to 89.2p and Imperial Brands, up 2.7% to 1,697.5p.

Fallers so far this morning include Hilton Food Group, down 0.5% to 1,150p, SSP Group, down 0.4% to 212.3p and Naked Wines, down 0.3% to 335.4p.

Yesterday in the City

The FTSE 100 opened the week firmly on the back foot, dropping 2.3% to 7,216.5pts yesterday on concerns over the global economy.

Big fallers included Deliveroo, down 11.7% to 86.8p, Hotel Chocolat, down 10.6% to 328p, Just Eat, down 8.2% to 1,590.8p, SSP Group, down 6.3% to 213.2p, THG, down 5.3% to 103.1p, Bakkavor, down 5.2% to 94p, Naked Wines, down 4.8% to 336.4p, FeverTree, down 4.6% to 1,460p and Compass Group, down 4.5% to 1,576.5p.

Notably the supermarkets were amongst the few major stocks on the rise, with Sainsbury’s up 2.2% to 233p and Tesco up 1.5% to 275.5p.

Other scarce risers included Coca-Cola HBC, up 1.2% to 1,567p, Unilever, up 1.1% to 3,636p, AG Barr, up 1.1% to 561p, McBride, up 0.9% to 35.5p.