Article: Business Restructuring Retail Market Focus

01 September 2016

André Trebert , Director, BDO Limited / Partner, BDO LLP (UK) |
Déne Reardon , Audit Director |

Despite stores’ attempts to lure in shoppers with widespread discounting of up to 70%, high street sales came to a halt with no growth (0%) in overall year-on-year sales for July, as described in BDO’s monthly High Street Sales Tracker (HSST).

Given the reported negative consumer sentiment following the EU Referendum, and the declining footfall, retailers have staved off a drop in total sales this month, with homewares and lifestyle seeing sales growth, while fashion remained in the negative. However, an environment of heavy discounting may also be negatively impacting margins and profits.

Sophie Michael, Head of Retail and Wholesale at BDO LLP, said retailers would need to focus on their margins now the discounting period had finished.

“Inflation is low, as is unemployment, but so is consumer confidence,” she said. “Stores are finding it really difficult to get people to spend unless they feel they’re getting a bargain, which is why we’re even seeing discounts on new lines,” she explained.

“The challenge for stores over the next couple of months will be to keep new stock on sale at full price for as long as possible. Retailers will be looking at opportunities to increase margins in the post-referendum marketplace, such as possible changes to their supply chains and sourcing models and exploring the export market.

“But such changes to their businesses take time to assess and implement, particularly when there are still so many uncertainties ahead. It is important that businesses stay flexible and vigilant to enable them to deal with challenges but also grasp opportunities that will arise in these changing times.”

Read this month's High Street Sales Tracker analysis.

The BDO High Street Sales Tracker outlines the weekly sales changes of more than 70 mid market retailers with some 10,000 individual stores. These are mainly located on high streets throughout the UK. As such it provides a very good indication of underlying trading conditions without the distorting effect of large grocery based retailers, as well as changes in retail capacity.