Disappointing UK retail sales figures in September have knocked shares in clothing, electrical and general goods sellers. The British Retail Consortium (BRC) says the month's 0.7% like-for-like sales increase is the weakest growth so far this year. This compares with a 1.8% gain in August and a 2.2% rise in July and leads investors to worry about whether this is a sustained slowdown in growth for UK-quoted retailers, putting their earnings forecasts into jeopardy.
Marks & Spencer (MKS) falls 3.7% to 462.5p; Dixons Retail (DXNS) retreats 3% to 45.11p; Home Retail (HOME) is down 2.6% to 166.9p; and Halfords (HFD) dips 0.7% to 381.3p.
David McCorquodale, head of retail at KPMG says: These figures are a reality check and will make retailers nervous as we enter the run up to Christmas. The stark fact is the retail recovery remains fragile and in the lead up to Christmas retailers, who are generally carrying less stock than in prior years, will need to manage promotional activity carefully to maintain margins.'
The 0.7% growth in September was driven by electricals and leisure goods, while food experienced a decline in like-for-like sales, says the BRC. What's interesting is a strong performance in home accessories, which the BRC attributes to the continued improvement in the UK housing market. It also flags ongoing strength in online sales for non-food items.
Coinciding with the retail sales data is a new report from the British Chambers of Commerce (BCC) which notes increased sales and optimism in the third quarter among UK companies.
The BCC says it is likely to upwardly revise its GDP forecasts for 2013 and 2014. Yet it says the latest results 'must not lull us into a false sense of security,' comments the BCC's chief economist, David Kern.
He adds: 'Growth will continue, but it is likely to slow slightly following this recent spurt. External shocks from the US shutdown, possible debt default and tapering, and continued risks elsewhere in the world could all impact on our fragile recovery. At home, the impact of reducing the deficit, fixing the banking system, and the relentless squeeze on living standards will inevitably act as a constraint on growth in the next few years.'
