According to the latest figures from the Office of National Statistics (ONS), UK retail sales fell In June for the fourth time in six months on the back of a colder-than-usual June and high costs for households.
Looking specifically at clothing, textile and footwear stores, sales volumes were 1.6% lower when considering a monthly percentage change.
Non-food store sales volumes (the total of department, clothing, household, and other non-food stores) fell by 2.1% in June 2024. This follows a rise of 3.3% in May 2024. All sub-sectors fell over the month, with strong downward contributions from department stores, clothing and footwear retailers, and furniture stores. Retailers suggested election uncertainty, poor weather, and low footfall affected sales.
When comparing Q2 (April to June) 2024 with Q1 (January to March) 2024, non-food store sales volumes fell by 0.5%.
Online textile, clothing and footwear stores experienced a 5.4% decline in sales on a value basis in June.
What June sales performance tells us about the remainder of the year
The British Retail Consortium’s, director of insight, Kris Hamer, notes categories sensitive to colder weather, like clothing performed “particularly poorly”.
Speaking to Just Style, GlobalData apparel analyst Louise Deglise-Favre notes June was substantially “worse than expected” with commodity data showing it was -7% down on the year. “It was worse than May and worse than we expected and yes, much of it can be blamed on gloomy weather not helping to lift clothing sales,” she notes.
The concern, she adds, is that retailers will be left with a lot of stock to sell through during the remainder of the year which is likely to result in heavy discounting.
That said, Deglise-Favre says there is some hope for improvement as the year progresses with a new government in place in the UK and a gradual easing of inflation which is reducing the financial pressure on households.
“Nevertheless, based on the surprise figures we will be revising our forecasts for the remainder of the year downwards as the lift will not be glorious. When it comes to clothing, there won’t be a huge demand for it even as inflation eases as it remains one of the categories that is deprioritised.
“The weather is expected to remain unpredictable and if we end up having a warm A/W then all the winter ranges – which are already making their way to retailers – won’t be suitable. That’s going to be the nail in the coffin.”
Matt Jeffers, retail strategy and consulting managing director for Accenture in the UK & Ireland adds retailers will be” bitterly disappointed” by the June sales figures with many having pinned their hopes on the array of cultural and sporting events in the month providing a boost.
“Sales across department stores and clothing fared particularly poorly, a concern as we enter the important summer months.
Could July bring brighter news for UK retail?
“The sector will hope to buck this trend in July, with the prospect of the Euros and Wimbledon finals likely to drive stronger sales," he adds. "While the Olympics may provide another boost in late summer, retailers should be thinking about how they can reignite sales momentum for the remainder of the year. Sharpening their product and value propositions will be crucial as consumers remain persistently discerning about what, where and when they are willing to make a purchase.”
Charlie Huggins, manager of the Quality Shares Portfolio at Wealth Club meanwhile notes, that the comparison is May which was a month where sales “were especially strong”.
“Sales volumes over the last three and six months are broadly flat and suggest the consumer is in reasonable health, but not exactly feeling flush.”
But he says the volatility in UK monthly retail sales is making it more difficult than usual “to read the economic tea leaves.”
“June was not a great month for the sector. But inflation is moderating, wages are rising and the election is now done and dusted, providing much-needed certainty. This means sales could easily bounce back over summer, especially if the weather Gods start being a little more kind."
Melissa Minkow, director of retail strategy, CI&T, agrees that now elections are out of the way – whose uncertainty saw consumers pull back on spending – July may see a slight uptick thanks to the Euros and promise of warmer weather.
“Spending trends are becoming harder to nail down because the consistency just hasn’t been there the last few years. We’ve been seeing conservative growth, and then a pullback, which repeats in a way that’s non-linear. It's indicative of a fickler consumer base that is dealing with a harsher economic climate.
“With events like the Euros, there are the months where consumers find themselves with a little extra free time given the season. So, even when the weather isn't behaving, there's still that urge to spend on experiences.”
While BRC's Hamer believes with the summer social season nearly in full swing, and a new government offering a fresh approach to the economy, retailers are hopeful that consumer confidence will improve, and spending will pick back up.
“The King’s speech laid the foundations for a more modern and dynamic British economy, and retailers look forward to working closely with the government to maximise the industry’s contribution. This includes greater investment in skills and training, and using reforms to planning laws to create thriving town and city centres.”
Retailers should target loyalty rewards, AI and innovation to buck downward trend
Meanwhile, Sachin Jangam, global practice leader at Infosys Consulting, Consumer Goods, Retail and Logistics, is urging retailers to capitalise on innovation to elevate their offering.
“A loyalty-based pricing strategy is one of the best innovations, helping to drive gains in market share. Subscription-based offerings are the next best opportunity to drive further market share, allowing digitally minded consumers to receive monthly products and the latest deals seamlessly. AI-driven assortment changes in line with consumer preference will be another big theme retailers need to double down on.”
Nick Delis, SVP of international and strategic business, Five9, agrees: “To avoid a summer of strife, retailers need to double down on customer loyalty. UK retail brands must give customers exactly what they want, when they want it, and across their preferred channels to secure genuine long-term loyalty. Amidst falling consumer confidence, one negative interaction with a brand could lead to losing a once-loyal customer for good.
“First-class customer experiences should be the priority to ease the ongoing pressures facing retailers. AI-powered tools could prove massively useful in terms of improving the customer experience with perhaps the place with the biggest opportunity being boosting customer service efficiency. Using AI to help customers self-service as well as routing customer enquiries quickly and effectively to the best support staff, ensures both customers and service agents have what they need to succeed. For customers, they find resolutions quickly and when most convenient for them, and for agents, provide the most up-to-date information possible to minimise customer frustrations and enhance satisfaction.
“By leveraging AI-driven, data-rich insights, UK retail brands can empower themselves to take a proactive approach to their customer strategy and fortify themselves for the sales season ahead – come rain or come shine.”
