UK retail in surprise November boost says CBI, but is aggressive discounting the reason?
In the current tough fashion retail environment industry watchers are looking for any crumb that suggests some good news for the sector. So the latest Confederation of British Industry (CBI) monthly survey is being closely watched, even if it’s often the survey most prone to revision later on.
And did it offer any crumbs of comfort? Up to a point, yes. Fashion stores helped sales to strengthen earlier this month with 39% of the retailers that the CBI polled saying their sales volumes rose in early November. Only 13% said they declined. That left a balance of +26%, which beat the much smaller +5% reading that analysts had been predicting and was way ahead of the -36% in ‘mensis horribilis’ October.
And there’s a +30% balance of retailers expecting volumes to tick upwards next month with 39% feeling positive and 9% negative.
But even though the festive season is fast approaching, it’s not quite time to get out the party poppers just yet and it can’t be ignored that both last month and this month have been marked by discounting on the high street. This has become increasingly aggressive as the weeks have passed and in the last few days leading up to Black Friday, ’20% off everything’ seems to have been the minimum discount many stores have offered. A large number have been discounting between 30% and 50%.
That activity could suggest that the increased volumes of recent weeks might not turn out to be good news for profits. If higher sales were down to price cuts, then margins will have been hurt and the slew of trading updates expected for early January might not deliver very good news.
Rain Newton-Smith, chief analyst at the CBI, reflected this caution, saying: “Our high streets are not out of the woods. Ahead of the crucial run-up to Christmas, the weaker pound has pushed up prices and retailers are nervous about business conditions and are trimming their workforces.”
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