Author: By James Thompson
Total sales over the festive season will decline because of low levels of housing transactions that will affect home-related sales, deflation in categories such as electricals, and the capacity that has come out of the market from retail failures over the past year, the consultancy Verdict said.
Maureen Hinton, Verdict’s lead analyst, also said the reduction in VAT last November was a “significant factor” in this year’s expected decline in fourth-quarter trading. “In order to maintain sales at last year’s level, retailers would have to increase volume or prices, but overall both have declined as competition has intensified,” she said.
Verdict forecast that, for the first time since it kept records in 1989, spending in stores would fall by 0.7 per cent, or £535m, in the fourth quarter. The main reason is expected to be a 2.5 per cent fall in non-food sales in the fourth quarter to £1.3bn.
Ms Hinton said: “The housing market is [affecting] home-related categories, such as furniture, flooring and DIY, but the decline also reflects deflation in electricals.” While non-food retailers will grab excess sales from the collapse of rivals such as Woolworths and MFI, Ms Hinton said this would not make up for those who have left the market. But few expect a repeat of last year’s deluge of administrations, and despite slowing food inflation, grocery sales are set to rise by 2.3 per cent, or £723m.
Ms Hinton said: “The cut in VAT is a significant factor, and many retailers will do better this Christmas because they will pick up share from casualties, as well as being up against weak comparatives.” The worst hit will be electrical stores, with sales down 5.9 per cent, or £461m, and furniture chains, down by 9.3 per cent, or £343m.
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