The retail sector’s crucial Golden Quarter period, which encompasses Christmas and Black Friday, has started poorly with disappointing sales growth in October, new figures by accountancy and business advisory firm BDO LLP reveal.
According to BDO’s High Street Sales Tracker, total like-for-like (LFL) sales (combined in-store and online) grew by +3.5% in October, compared to a base of +19.9% in the equivalent month last year. However, with a strong first week of sales masking poor performance across the rest of the month, these results are a disappointing start to this vital time of year.
Total non-store LFLs recorded the first positive results (+0.5%) since July, following negative results in August and September. With growth of just +5.9%, total in-store LFLs recorded the lowest results since stores reopened when the UK emerged from lockdown in 2021.
October started strongly with total LFLs recording an increase of +11.48%, compared to +22.03% for the same week last year. These positive results were likely making up for the slowdown in sales resulting from the bank holiday funeral of Queen Elizabeth II the preceding week. However, following weeks showed much lower levels of growth, with weeks two and three recording total LFL growth of +5.63% and +4.16% respectively. In the fourth week LFL growth fell to +0.27% and in the final week of the month, total LFL sales went negative, falling to -1.84%.
Sector Results
The fashion sector was the strongest performing category throughout October, with total LFLs climbing by +6.7% from a base of +36.8%. This marks 20 consecutive months of positive total LFL sales figures for the fashion sector, but is the third straight month of slower growth.
The homewares sector recorded total LFL sales growth of +3.5% in October, the first positive set of results since April 2022, following five consecutive months of negative results. However, these figures are compared to a low base of +0.7% in October 2021.
October was also a disappointing month for the lifestyle sector, with total LFLs falling by -0.1%, from a base of +10.0% in the previous year. This is the first negative result for the category since February 2021, suggesting that the fall in consumer discretionary spend has spread to include the lifestyle sector, having already seen homewares record declines in recent months.
Sophie Michael, Head of Retail and Wholesale at BDO LLP, said: “This is a disappointing start to the most important part of the retail calendar. After a summer of sluggish retail sales growth, retailers would have been hoping for performance to pick up once we reached the Golden Quarter. However, like-for-like sales are continuing to trend downwards, as consumer confidence remains at near record lows.
“October may have started strongly but sales quickly tailed off, with negative results in the final week of the month. If we remove the first week of the month from these results which was making up for the held back spend of the extra bank holiday, retail sales grew by only +1.8%. Given the current level of inflation, this means that actual sales volumes have decreased significantly.
“We are likely to see different actions being taken by retailers in the run up to Black Friday depending on their performance to date, stock levels and also challenges that they may be facing on working capital Across the sector it’s clear that retailers will have to think carefully on pricing to persuade shoppers to part with their cash, without further impacting their already low profit margins. As ever, some will look to make operational savings or reduce costs through the supply chain, but when faced with such strong economic headwinds, there is only so much the sector can do to preserve their business.”
