Scottish Sales Growth Bolstered By Food and Drink

Sector In Profile: Food and Drink

Like-for-like sales retail sales in July were 0.2% higher than a year ago, when they had fallen 1.4% with total sales up 1.7% on July 2010, when they had increased 0.8%. Food sales picked up after a tough June.

The SRC-KPMG Scottish Retail Sales Monitor for July 2011 shows that clothing and footwear showed a clearance-led improvement but remained lower than a year ago.

Homewares were also mostly down on a year ago and often promotion-driven, and consumer caution continued to hit big-ticket housing-related purchases.

As in the UK, both like-for-like and total sales were "less bad" in July but underlying trends were little changed. Consumer confidence was still much weaker in Scotland than in the UK as a whole, and had fallen further in both.

Richard Dodd, the Scottish Retail Consortium's head of media, said: "This general return to sales growth is positive news for Scottish retailers but it shouldn't detract from the underlying weakness in consumer spending.

"Shoppers continue to feel the impact of high levels of inflation and low wage growth as households' real incomes shrink. The VAT increase and the effects of cuts have also dented consumer confidence.

"What growth there was in July came from food and drink, partly due to better weather later in the month but also to the effect of inflation on top-line growth.

"Sales of non-food goods fell for the third consecutive month as consumers shunned non-essential buying.

Scottish customers are more likely to be worried about their prospects than those in other parts of the UK and more reluctant to spend where they don't have to.

"With public-sector job cuts likely to hit hard and unemployment forecast to rise this year and next, conditions on the high street are likely to remain tough in the run-up to Christmas."

David McCorquodale, head of retail in Scotland for KPMG, said: "After two months without growth, July's modest increase compared with the same month last year will come as some relief for Scottish retailers.

"But given the level of inflation and the increase in the VAT rate, customers are actually buying fewer goods than a year ago.

"Despite more people choosing to holiday at home rather than spending time and money abroad, the three-month average remains weak.

"Pay freezes for Scotland's workforce, coupled with inflation in energy bills, are clearly having a detrimental effect on consumer confidence as economic uncertainty reigns.

"This is evidenced in the continued struggle in the big-ticket item market but the relative strength in the value sector.

"Few retailers are particularly optimistic about the outlook, although many expect inflationary pressures to decrease in the latter part of the year.

Source- Scottish Retail Consortium Website (SRC)