UK Retail Sales Bounce as Shoppers Snap Up Clothing and Footwear

UK retail sales rebounded in August, led by the clothing and footwear sectors, according to data from the British Retail Consortium and KPMG.

Sales grew 1.3% on a like-for-like basis from a year earlier after falling 0.3% in July and beating the market consensus of a marginal 0.5% growth.

In terms of total volumes, sales were up 2.7%, the best performance since January, excluding Easter distortions, the BRC said.

Clothing and footwear reported their fastest growth rate since December 2011. Food was the worst performing category with a record three-month average decline, BRC said.

"Retailers have pointed to the successful launch of their autumn fashion collections helped by the cooler weather, as well as a good response to marketing campaigns for back to school clothing," said Helen Dickinson, the director general of BRC.

Furniture sales also did well as the strength of the housing market continues although not as well as in July.

Food Sector

Over the last three months, food showed a decline of 1.6%, in contrast to a 0.1% growth experienced over the last 12 months.

The non-food segment reported a growth of 3.9% over the three months to August 2014, in line with its 12-month average.

"Consumers are still taking advantage of record low food inflation," according to BRC's Dickinson.

The food sector remains in a state of disruption with the share of the "big four" being challenged on many fronts after a 15-year reign, according to David McCorquodale, head of retail at KPMG.

"The like for like decline shows the battle is being fought via the prices on the shelves, but the war may be won by those grocers best able to adhere to brand values to retain customer loyalty," McCorquodale said.

Hopes and Challenges

The strong retail sales data for August indicate a higher level of consumer confidence in the UK economy, BRC said.

The successful summer has placed non-food retailers on a firm footing for the autumn/winter trading period and the run- up to Christmas, according to KPMG.

"With autumn drawing in, the countdown to Christmas has now begun. This will be a true bellwether of consumer confidence. If shoppers feel secure enough in the future to spend, then retailers could be in for an enjoyable Christmas this year," said McCorquodale.

The BRC said that the strength of the economy is not yet consistent across all areas, adding that the challenge for retailers in such a situation is to ensure continued investment in digital innovation, the physical retail space and job creation.

"For our part the BRC continues to engage with all the parties to look at fundamental reform of the business rates system in order to ease the costs of doing business to support the industry's ability to serve its customers better and respond to transformational change."

Online sales of non-food products in the UK grew 19.8% in August versus a year earlier, the highest online growth on record.

The non-food online penetration rate was 16.5% in August, 1.7% higher than in August 2013, the BRC data showed.

Pound

Despite the strong retail sales numbers, sterling continues southward as the currency has been hit by bigger factors such as the Scottish independence and a broad dollar rally.

A survey result over the weekend that showed the supporters of the break-up increased to majority weakened the UK currency sharply on Monday.

The GBP/USD pair continued downward on Tuesday and hit a fresh 10-month low of 1.6064. At the low so far on Tuesday, Cable was down 1.6% from Friday's close.

The USD index, the gauge that measures the greenback's strength against a basket of major currencies, rose to a new 14-month high of 84.50 on Tuesday, from Monday's close of 84.31.