High street sales ahead but still sluggish, reports CBI

High street sales rose in April compared with a year ago but the pace of growth remains subdued, the CBI said today.

Its latest Distributive Trades Survey, for the two weeks from 30 March, found 45% of retailers saw the volume of sales rise in the year to April, while 24% said they fell. The resulting balance of +21% was in line with expectations (+18%), but next month no growth in sales volumes is expected (-1%).

Sales in April were considered poor for the time of year. While 12% of retailers reported sales to be good, 35% said they were poor, and the resulting balance of -23% was very close to last month’s figure, the lowest since August 2009 (-25%). Retailers expect sales will remain well below seasonal norms in May (-18%).

The three-month moving average of sales volume growth, which shows the underlying trend, worsened for the third month running, with a balance of +14% the lowest since July last year (+3%). If expectations are realised, a further decline will be seen again next month to +6%.

Having fallen in March (a balance of -8%) for the first time in nine months, orders placed by retailers with suppliers were unchanged in April (0%) compared with a year ago. Orders are expected to fall a little in May (-4%).

The volume of stocks in relation to expected demand (+23%) was above the long-run average (+18%) for the fifth month running.

Ian McCafferty, CBI chief economic adviser, said: “Despite slightly better year-on-year sales growth in April, this survey shows things are far from rosy on the high street. For the third month in a row, retailers considered sales to be unseasonably poor, stocks are running quite high, and orders with suppliers are expected to fall.

“With few signs of demand picking up rapidly in the coming months, conditions on the high street look like remaining tough for retailers.”

Nearly all the retailing sub-sectors saw a modest improvement in sales growth in the year to April, with the two largest sectors among the strongest performers. Grocers reported a balance of +53%, compared with +39% last month, and clothing retailers saw +48% against +22%.

By contrast, chemists’ sales volumes took a further turn for the worse (a balance of -52% compared with -5% in March) and sales growth of footwear and leather deteriorated (+23% against +41%). Sales of durable household goods, including big-ticket electrical items, continued to fall, though at a slower pace than last month (-38% following -88%), as did hardware and DIY (-6% compared with -44%).

Judith McKenna, chair of the CBI Distributive Trades Panel and Asda chief financial officer, said: “Retailers are having to pull out all the stops to achieve sales growth, and this month was no exception. The squeeze on people’s pockets from rising commodity prices means consumers are seeking out value wherever they can.

“This month’s survey shows sales of dearer goods, such as consumer durables, hardware and DIY, are a particular stretch for hard-pressed households.”

Among wholesalers, annual growth in sales volumes slowed sharply in the year to April. While 48% of wholesalers who responded to the survey said volumes were up, 35% said they were down, giving a balance of +13%. This was far slower than in each of the previous three months and a similar pace of growth is anticipated next month (+12%).

In motor trades, the volume of sales fell for the fourth month running, compared with a year ago. While 27% of survey respondents reported a rise in volume of sales, 43% reported a fall, resulting in a rounded balance of -17%. A further fall is expected in May (-20%).