Retail sales flat; Greggs counts cost of riots

A mixed bag for retailers this morning.  Like-for-like UK retail sales were up 0.6% last month compared to the same time a year ago, the British Retail Consortium said.  But taking into account inflation and the VAT rise in January, the organisation warns it effectively means people are buying fewer goods.  Meanwhile, Greggs is the latest high street chain to report a fall in profits, suggesting that trading conditions remain tough for retailers.  And that’s before the riots took hold, forcing several of its stores to close.

On a total basis, retail sales were up 2.5% last month, against a 2.6% increase in July 2010. The BRC’s director general Stephen Robertson said it’s a modest improvement but came because of an early start to the summer sales, which saw heavy discounting in clothes and footwear.  The global economic crisis is also keeping customers away from buying big-ticket items, unless they come with a heavy discount.  ‘Consumer confidence needs to be restored quickly before spending paralysis sets in,’ Robertson warned.  

But it’s food sales that are really responsible for fattening the figures.  Food sales rose 3.6% over the past three months, largely helped by inflation pushing up the price of groceries, while sales of non-food items such as clothing came up rather short, falling 0.4%.

While food sales are rising in supermarkets, though, it’s slim pickings for bakery chain Greggs.  Profits fell after the two extra bank holidays over the Easter period hit trading by £2m, it reported in its half year results.  Operating profit was down £1.2m to £17.3m, while like for like sales grew by a modest 0.4%. ‘Trading conditions have proved to be more challenging than we had expected,’ the company said.  Perhaps the nation’s love affair with cheese and onion pasties has finally hit the rocks?

Of course, those challenges have been heightened in the aftermath of the riots that gripped parts of the UK over the last three days.  One of Greggs’ stores was destroyed by fire, another was looted and overnight deliveries were also affected after a delivery driver was assaulted.  In total, the company closed 25 stores across London and Birmingham as the chaos spread.  

So far Greggs hasn’t put a cost on the damage, but CEO Ken McMeikan is remaining optimistic: ‘The overall financial impact will be very small. Relative to other retailers, we have had low impact in terms of damage.’

This article was first published on managementtoday.co.uk