Shoppers shun January sales

Jan 30 2008 by Sarah Miloudi, Western Mail

THE January sales failed to resurrect the fortunes of high street retailers after a disastrous Christmas, a leading business organisation warned yesterday.

In its latest survey of retail performance, the CBI said 34% of businesses questioned said their January sales figures were lower compared with the year before.

The figures will fuel concerns over performance in the retail sector throughout 2008.

Since the beginning of January, a string of well-known stores reported a fall in sales in what is supposed to be one of the busiest periods of the year.

Tesco filed figures showing lower than expected growth for the six-week period leading up to January 5, and Marks & Spencer said like-for-like sales in the same period fell by 2.2% – their worst performance in more than two years.

John Longworth of the CBI said the January sales figures reported by companies were “flat”, and weaker than those issued in the lead up to Christmas.

He warned that while sales of groceries were reasonable, considering the difficult economic climate, the effects of shoppers cutting back were noticeable in other areas.

Mr Longworth, the organisation’s chairman of distributive trade, said, “The January sales were a little flat this year, and were weaker than the lacklustre lead-up to Christmas.

“While sales of groceries and household essentials went quite well, shoppers are watching their wallets, and that can be seen in the drop in sales of big-ticket items like TVs and washing machines.”

David Rosser, director of the CBI in Wales, said, “All the discussions I have had with retailers in Wales show these findings are pretty representative of the sector here.

“There are definitely signs consumers are keeping their money firmly in their wallets and are spending their money more cautiously. But we are not heading towards a recession. 2008 will undoubtedly be a difficult year and companies are gearing themselves up for this.”

Mr Rosser warned that if global stock markets continued to fall and consumer confidence did not improve, then retailers could find themselves in a difficult position.

Economist Dylan Jones-Evans, of Cardiff University, said consumers were cutting back on non-essential items, and said other sectors in addition to high street retailers could begin to feel the effect of falling sales.

Prof Jones-Evans said, “It is obvious there is a problem with prices and consumer confidence, and people do not feel they should be spending.

“With rising costs, people feel they should be keeping their money for other things such as mortgages and not spending on luxuries like second holidays or eating out.

“For this reason, we will be seeing other sectors such as hoteliers also noticing the effects as people begin to change their habits.”

Not all retailers questioned by the CBI reported a decrease in post-Christmas sales, with 39% of firms in the retail, wholesale and motoring sectors experiencing a slight growth in their performance.

However, the Federation of Small Businesses in Wales (FSB) said the figures provided yet more evidence of the tough economic climate facing some Welsh businesses, and urged the Bank of England to reduce its base rate to boost high street spending.

Simon Evans, spokesman for the FSB in Wales, said, “This news is more evidence of the tougher economic conditions small businesses in Wales are likely to face in 2008, and they send a clear signal to the Bank of England to consider further interest rates cuts to boost spending on the high street, as if people stop spending, businesses stop making money.

“It is clear people are becoming extremely cautious with their money.”

Performance in other sectors such as the wholesale and motoring markets also fell sharply in the period after Christmas, and the CBI has said it expects trade to remain at the same level in these sectors next month.

The CBI report covers 20,000 outlets and firms which are responsible for 40% of employment in the UK’s retail industry.

Business conditions have been found to vary greatly across sectors since the start of January 2008, with year-on-year sales among leather, footwear and furniture stores picking up after suffering a decline in sales throughout December.

More than 150 British retailers responded to the CBI survey, which questioned firms about their performances between January 2 and January 16 this year.