Further doom and gloom for retail sales

November saw the worst sales growth in UK retail for six months, with subdued food sales little changed from October’s 5-month low, figures from the British Retail Consortium have revealed.

The BRC-KPMG retail sales monitor showed retail sales values were 1.6% lower on a like-for-like basis from November 2010, with total sales up only 0.7%, against a 2.8% increase in November 2010. Food sales growth was relatively unchanged, up 4.6% compared to 4.9% last month, while like-for-like food sales were 1.5% (3 month rolling average) compared to 1.8% last month.

Stephen Robertson, director general of the BRC said: “There’s a worrying lack of cheer in these figures. The weakest increase in sales for six months suggests consumers are keeping a tight rein on their spending, despite Christmas being so near.

However Kantar’s grocery share index for the 12 weeks ending 27 November 2011, also out today, showed the grocery market growing at 4.2% per year, although this is below the 6.2% inflation rate as shoppers continue to feel the bite.  

There were strong performances from Morrisons (from 12.0% to 12.1%) and Asda, who posted its best growth since December 2009, due to its acquisition of discount retailer Netto. This move has benefitted Aldi and Lidl who gained some of Netto’s customers, although the hard discounters sector has slipped back to 6.0% from 6.2% a year ago.

Tesco however took less cash at the tills as a result of the ‘Big Price Drop’ initiative, but still managed to attract more shoppers. It was the only one of the big four to see its share slip, from 30.7% last year to 30.5%. Its growth rate has also fallen behind that of the market, at 3.8%.

A duo of city analysts said that the Tesco’s big price drop had proved underwhelming and weak sales was eroding its UK margin. Although the supermarket price wars had a dramatic effect on the October figures, with food 0.5% cheaper in October than the preceding month (the biggest month-on-month drop for more than two years), Dave McCarthy and Andrew Porteous of Evolution Securities criticised retailers for promulgating confused pricing and point-of-sale material, which is making the consumer increasingly unconvinced about price claims.

They said: “It is no surprise that there is a lot of scepticism around prices. With ‘savvy’ consumers cross shopping more than ever... the old adage of ‘you can’t fool all the people all the time’ has never been more true. Each retailer faces a challenge to break through the noise barrier with an effective marketing stance that is meaningful to the consumer. If a retailer can do that, it will gain traction.

“Simplicity may be the answer - after all, en masse, savvy consumers area a lot brighter than a few marketing executives, and they want lower prices, not marketing spin.”