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Retail health set to hit new low in quarter four - ToyNews

Retail health set to hit new low in quarter four

Abnormally high number of destabilising factors create uncertainty heading into Q4.
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The Retail Think Tank's October sitting has concluded that the state of retail health fell again in the third quarter, returning to the same downward trend seen in the first quarter of 2011.

During Q3, the Retail Health Index (RHI) dropped two points to 82, returning it to the level recorded during the depths of the original banking crisis and recession, in quarters two and three 2009.

The group said that falling demand hit retail health the hardest, with shrinking margins also having a negative impact.

RTT Members expect the downward trend in retail health to continue at the same rate in the all-important fourth quarter, pushing the RHI to 80, its lowest value since the RTT first sat in quarter one 2006.

Declining margins is the main cause for concern to retail health. The RTT believes demand will still be in trouble also.

Nick Bubb, Arden Partners: commented: "The debate as to the relative strengths of food retail versus non-food retail intensified in quarter three. We had previously seen some significant differences between the relative health of those retailers selling ‘must buy’ items such as food and those selling ‘might buy’ items such as fashion and household goods etc.

"However, there is now very clear evidence that food demand is falling, margins are weakening and weekly shopping patterns are changing as consumers buy little and often to cut waste, shop more locally to save vehicle fuel and shop around more to compare prices and offers. Looking forward, my key messages to all retailers would be; Don’t Panic; but Christmas will not be experienced at full price."

Tim Denison, Synovate added: “We are very conscious that our analysis of retail health is gloomy and the last thing we want to do is talk the sector into a further state of decline.

"Our fundamental concern about quarter four rests on the fact that there are a lot more moving parts to the current scenario than of late, which inevitably heightens the level of risk to the sector at its most critical time of the year."

Neil Saunders, Decipher Retail commented: “The good news is that weaker retailers are not likely to fail before Christmas. They will have already struck deals with landlords, suppliers and bankers and will look to benefit from the usual massive Christmas uplift to sales. However, come early January/the last 2011 quarterly rent day, there is little doubt that some weaker retailers will very quickly find themselves in Carey Street. The face of retail in Britain is undoubtedly changing, and faster than we’ve seen for a generation.

"In quarter four we’ll see lower stock levels than for years and consequently it’s likely that most retailers will resist going to promotion or Sale for as long as possible. However, as one weakens others will surely follow. Widespread Sales across entire ranges are unlikely, except in those most deferrable of purchases; furniture and other big ticket items such as electronics, where many bargains will be available."

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