The City took heart at better than anticipated retail sales in June, raising the prospect of sector upgrades.

Good weather and promotions helped retail sales climb 1.4 per cent like for like and total sales advanced 3.2 per cent, the monthly BRC-KPMG Retail Sales Monitor showed.

Many general retailers achieved a better month – clearance Sales, for example, lifted clothing retailers’ performance – and food sold well, although easing inflation meant growth in that sector was lower than in May.

Numis analyst Nick Coulter said: “The statistics represented a solid turn-out and run rates should continue to benefit from progressively easier comparatives as we begin to annualise the crunch.

“With respect to the sector, while the names have pulled back in recent weeks, retailers have held their own on a relative basis and we see scope for earnings upgrades to sustain this performance.”

Although Sales helped fashion groups’ performance, Coulter observed: “For the most part we believe the quoted names will have benefited from sun-driven demand at full margin.”

Pali analyst Nick Bubb said: “The overall comparative for June was weaker and against that we expected to see some modest growth, perhaps 0.2 per cent
overall, but the outcome was better than expected.”

But Investec analyst Natalia Marisova remained circumspect about retailers’ prospects. She said: “With sales still driven by promotional activity across most categories, we believe this month’s reading indicates little improvement in underlying trading patterns.”

Hard-pressed big-ticket retailers, whose recovery would indicate improving consumer confidence and a widespread retail recovery, continued to find the going tough.

BRC director-general Stephen Robertson said: “The sun knocked sales of big-ticket items such as furniture and homewares.

Given the uncertainty about jobs, customers are still nervous about spending on more expensive non-essentials.”

How retailers fared in June

  • Food and drink The heatwave drove sales of summer food such as cold meats, berries and rosé wine
  • Clothing Many fashion retailers made gains against last June’s wet weather declines
  • Electricals Underlying trade remained subdued and promotionally driven but there was demand for items such as fans and air conditioning
  • Department stores Generally down. Sale bargains brought out shoppers but the hot weather didn’t help
  • DIY Enjoyed a good weather uplift
  • Homewares Accessories and textiles were both below June 2008 levels
  • Furniture and floor coverings Down year on year compared with a very weak June 2008
  • Leisure goods Outdoor lines did well. Books were down year on year. Computer games and consoles showed slower growth. Michael Jackson’s death generated a lift in DVD and CD sales