Why Retail’s Time to Panic Hasn’t Arrived Yet


The latest consumer confidence survey from GfK and March retail sales figures from the Office for National Statistics led to a wave of market gloom ahead of the weekend.

However, there are some rays of light in the retail sales report, even though the outlook is not that good.


Granted, the consumer confidence numbers aren’t pretty, with the overall index hitting a multi-year low of -38 points.

However, it looks like Britons may be ‘glass half empty’ at the best of times, as the overall index has been in negative territory for at least the last five years.

The GfK survey also asks consumers how confident they are about their financial situation 12 months from now, which predictably elicited a negative response given rising energy costs. and food.

The “major purchases” index, which measures consumers’ willingness to buy big-ticket items like flat-screen TVs and sofas, also hit a multi-year low.

GFK’s comment did little to boost morale: “This is bad news for consumer confidence and with little prospect of economic recovery on the horizon, we can only expect further declines. of the index for the coming year.”


Consumer spending data from the ONS on the other hand paints a much more mixed picture, with spending in value terms continuing to rise.

While the big numbers show retail sales volumes fell 1.4% between February and March, the annual change in retail sales in value – which for us is a much more meaningful measure as it reflects the quantity pounds actually spent – ​​is still pretty healthy. with sales up more than 10% compared to March 2021.

Granted, the country was in lockdown for most of March last year, but sales remained positive, especially for household items.

In March, non-food sales rose nearly 30% in value year-on-year, with strong increases in spending on clothing, footwear and leather goods and watches and jewelry.

That should mean decent Q1 profits for fashion and accessories retailers, including big brick-and-mortar operators.

Online sales were down 12% in value, but that’s mostly due to internet sales growing more than 40% a year ago.

One area of ​​weakness that stands out in particular is sales of do-it-yourself items such as paint, glass and hardware, which have fallen in value in seven of the past eight months, suggesting that the trend towards “doing the house” might slow down.


It’s hard not to agree with GfK’s assessment that things will get worse in terms of consumer sentiment, and when it comes to retail sales, the April and May numbers should look like a lot. weaker given the high growth rates in the second quarter of last year. .

Although apparel and homewares retailers may post strong sales for the quarter just ended, investors should be prepared for warnings as year-over-year comparisons look extremely difficult.

Sellers of footwear and leather goods, watches and jewelry, and furniture and lighting are all likely to play down expectations, which could send their stock prices down sharply.

Issue date: April 22, 2022


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