- Gloomy start to summer spending
- June volumes worse than feared
- Poor showing from weather-sensitive categories
Retail sales fell in June as colder-than-average weather conditions and election uncertainty dampened consumer spending, with sales across department stores and clothing categories faring especially poorly.
Last month’s disappointing sales decline came despite hopes of a boost from above-inflation wage growth and some major sporting events.
Shares in major retailers cheapened in reaction to the news, with Primark parent Associated British Foods (ABF) off 0.2% at £25.09, JD Sports Fashion (JD.) down 2.8% at 117.6p, Mike Ashley’s Frasers (FRAS) 0.5% easier at 891.5p and DFS Furniture (DFS) down 1% at 114.8p.
High street stalwarts Marks & Spencer (MKS) and Next (NXT) shrugged off the news, gaining 1.8% to 316.2p and 0.5% to £89.68 respectively.
Retailers will hope sales can buck this trend in July and August, with the prospect of the Euros and Wimbledon finals likely to drive stronger sales and the Olympics set to provide some late summer impetus.
SOGGY JUNE SALES
According to the latest ONS (Office for National Statistics) data, sales volumes softened by a worse-than-feared 1.2% in a colder-than-usual June, with seasonal and weather-sensitive categories such as clothing, DIY and gardening performing poorly.
This year’s cooler June contrasted with the comparable month in 2023, when the UK experience a record-breaking heatwave that supported strong spending across food and non-food categories.
All retail sectors except fuel declined in June reflecting a general stagnation of consumer spending appetite, with the steeper drop of 3.4% for department stores highlighting the discretionary nature of the sector.
June’s disappointing sales followed a better-than-expected 2.9% volume rise in May and continued the recent volatility in monthly sales performances caused by unseasonal weather and economic caution.
While June was not a great month for the sector, wages are rising, inflation is moderating and the UK general election is now done and dusted, providing much needed certainty for consumers, which means sales could bounce back over what’s left of the summer.
EXPERT VIEWS
Paul Donovan, chief economist at UBS, commented: ‘UK June retail sales were soggy, coming in below consensus (although not that many economists bother to forecast these numbers, so “consensus” is not necessarily that reliable). The weather was bad in June – there was also a rather unexpected general election campaign, but politics is not really a reason to stop shopping.’
Dan Coatsworth, investment analyst at AJ Bell, pointed out that the public had plenty of distractions in June, namely the impending general election, miserable weather, the Euros and high interest rates continuing to put pressure on household finances.
‘It’s no wonder that retail sales were poor in the month’, said Coatsworth. ‘The retail industry has had one of the most challenging years in living memory thanks to unfavourable weather conditions and the ongoing cost-of-living crisis. The pace of inflation might be easing but the cost of goods is still going up.
‘Decent wage growth has been welcome, but the general backdrop has kept retailers on their toes, desperate for ways to keep the tills ringing without resorting to bargain basement prices that leave them with little to no profit.’
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (James Crux) and the editor (Steven Frazer) own shares in AJ Bell.
