At its latest quarterly meeting in April, the KPMG/Ipsos Retail Think Tank (RTT) came to the conclusion that the health of the UK retail sector is improving.
The RTT upped its Retail Health Index by one point to 77 points, the best result in two and a half years.
The RTT cited a marginal lift in demand as the main factor underlining the recovery and things could have been even better had the first quarter of the year not been marred by unusually cold weather. Christmas sales were strong, the food sector performed exceptionally well and the decline in footfall, caused by wintry weather, did not hurt overall demand. Gadgets also did well, as consumers decided to stay indoors and chuck Angry Birds on their shiny new tablets.
However, retailers’ margins weren’t as good. Food margins remained flat and margins on technology products remain low. Costs stayed flat. Although multichannel operations continued to spend more on fuel and energy, this was offset by reductions in estate sizes and creative cost cutting measures.
The outlook for retail health in the second quarter is not so great and it is expected to stay flat, reports FreshBusinessThinking.com. Consumer confidence remains low, inflation is rearing its ugly face again, fuel and energy prices are set to rise, demand still looks very soft.
“Overall the quarter was quite an even one for UK retailers as demand, margins and costs all remained relatively static and it looks like we’re at the bottom of the decline,” said David McCorquodale, Head of Retail, KPMG UK. “The weather did affect demand in terms of footfall being down, but otherwise sales were largely ok.”
