After fears of a dent in consumer confidence in the run-up to the election, the City was relieved to see April’s retail sales figures.
After fears of a dent in consumer confidence in the run up to the election, the City was relieved to see April’s retail sales figures, released this morning.
On the surface a 2.4% like-for-like fall in April looks disappointing. But considering the distortion of Easter, uncertainty surrounding the election and the promising three-month average, there are reasons to be cheerful, according to analysts.
The BRC-KPMG’s Retail Sales Monitor also reported total sales rose 1.9% over the three-month weighted average to the end of April – the strongest underlying growth since June last year.
Peel Hunt analyst John Stevenson acknowledged there were a “number of one-off factors” including last month being one of the warmest Aprils on record, but he reflected that overall the figures show an underlying improvement in consumer confidence.
The signs of improved sentiment will provide welcome relief for the City after ScS’s profit warning last week; the newly floated furniture retailer said uncertainty in the lead-up to the election hit consumer confidence in committing to big-ticket purchases.
Improved grocery sales
But as Stevenson noted, election concerns did not rock the whole market, and given the evidence of the encouraging BRC retail sales figures, he tips the “average retailer is likely to upgrade”.
“As we move through this reporting season, we will see surprises to the upside,” he said.
Stevenson is expecting a “positive” prelim update from Marks & Spencer next week, on the back of its recent upturn in general merchandise trading.
And he is also “bullish” on the home sector, despite ScS’s slip last week. He pointed to Topps Tiles and Dunelm as “obvious beneficiaries of better home-related trading” but his top tip is Carpetright. “Operational gearing is high here and further strong trading will be very well received,” he said.
Food analysts also took heart from the BRC figures. Shore Capital’s Clive Black called grocery the “star of the show”. Food total sales rose 0.4% over the quarter to the end of April, which Black noted was “materially ahead” of the -0.6% average over the last 12 months.
“Such an improvement, with positive volumes (noting widespread deflation) starting to emerge in the sector may be captured by supermarket share prices,” he said.
But any retail rebound must be greeted with a note of caution. While consumer confidence looks to have held up better than some feared in the run-up to the election, a Tory government pushing austerity policies could well spoil the party for some shoppers.
- Nicola Harrison is content editor of Retail Week