Although the financial markets rose at the start of the week after Prime Minister Gordon Brown unveiled a£500 billion rescue of the banks, fears remain that the retail sector faces a long haul before shoppers are willing to splash out again.
Comparable store sales fell 1.5 per cent last month, while total sales advanced 1 per cent, according to the BRC-KPMG Retail Sales Monitor.
Furniture groups were hit especially hard, recording their worst performance in eight years. Fashion suffered another blow after managing a small uplift in August and food was the only sector to manage a significant sales rise.
In the three months from July to September, like-for-likes were down 1.1 per cent on total sales ahead 1.4 per cent.
Citi analyst Edward Wright said: “We expect that the financial turmoil hitting front pages weakened confidence and drove sharper declines towards the end of the month. In this environment, the 50 basis points interest rate cut should offer little support to October trends.”
He believed that, after stripping out food sales, non-food turnover was down 6 per cent like-for-like last month.
He forecast an aggregate non-food like-for-like decline of 4.6 per cent for this year and 3.3 per cent next year and expects “broadly flat gross margin trends”.
Investec analyst David Jeary was not surprised by the weak performance and said: “Tighter household budgets encouraged careful spending and discouraged discretionary spending.”
KPMG head of retail Helen Dickinson said: “Despite the ongoing turmoil in global and UK financial markets and the doom and gloom headlines, retail is not in freefall. The UK consumer is still spending and total retail sales were up in September on the same period a year ago. However, the trend continues in a downward direction.”
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