Consumers axe discretionary spend after two months of growth.
Any hopes for a strong start to fourth-quarter trading on UK high streets have been dashed by the worst October for more than 10 years, figures released today by accountancy and business advisory firm BDO LLP reveal.
Overall like-for-like high street sales fell by -5.2% last month, the worst result for any month since April 2016 (-6.1%) and the largest year-on-year drop for October on record for the BDO High Street Sales Tracker (HSST).
An unusually warm month hit fashion sales, which dropped -7.9% year-on-year – the worst result for the category in the month of October ever recorded by the HSST.
Life-for-like sales of lifestyle goods slipped by -0.1% in October despite a boost in week three as Chinese visitors took advantage of the weak pound during China’s “Golden Week” holiday season. The dip in October made it the first negative month for the category since November 2016.
The homewares sector (down -0.5%) saw its first negative month since April, and only its third negative month in 2017.
The only good news came from non-store sales, which grew by 22% in October, peaking at 33.9% up year-on-year in the third week of the month, continuing the trend of the shift from in-store spend to online.
Sophie Michael, Head of Retail and Wholesale at BDO LLP said: “The continuing pressures on disposable income combined with a drop in consumer confidence have hit sales hard this month. The sharp decline in October sales will no doubt bring anxiety to UK retail in this critical trading period.
“With margins already tight and Black Friday looming, retailers will be working even harder at promotional activity and product differentiation to convince the reluctant shopper to spend with them. We may see a real polarisation of winners and losers on the high street in the near future.”
Retailers are hoping for some light relief from the Chancellor in his Budget speech later this month, with the switching of the RPI measure (at 3.9%) to the lower CPI (2.9%) rumoured to be brought forward.
Sophie Michael adds: “The high street is stuck between a rock and a hard place, with stagnant wage growth limiting spending power while online retailers have attracted what disposable income there is. We expect the Chancellor to give the high street some greater certainty by making adjustments to business rates in the Autumn Budget, however the worry is action from the government will not come quick enough.”