Emmanuel Hembert, principal at global strategy consultancy, AT Kearney, has warned of austere conditions on the UK high street.
“It’s a bloodbath on the high street,” Hembert said. “We urged caution about the unexpectedly upbeat retail figures in March and April – and we have unfortunately been proved right. Economic fundamentals remain weak and are suffocating consumer spending.
“Fuel rises, commodity prices, tax increases and public sector cutbacks are squeezing the consumer wallet. March and April were rosy on the surface, but in fact many sectors have experienced a decline in sales for several months in a row (such as home furnishings). It’s no surprise to see retailers like Habitat and Carpetright in difficulties.
“Retailers are eating each other’s lunch. Even Oddbins seems to have been a collateral victim of the promotion war on wine across retail formats. In order to continue growing, the large retailers are expanding into non-food, putting more high-street players at risk.
“Only the most efficient through the entire value chain (eg category management, assortment, logistics, store operations, promotions, pricing…) will survive. In the background looms the most worrying threat of all: the potential increase in interest rates. Mortgage payments in the UK already amount to £57bn, while interest rates are at an historical low. This is larger than the entire spend on apparel and accessories and certainly illustrates the impact a change in rates could have on the consumer wallet.”