Heavy discounting squeezes retailers’ margins further in the run up to ‘Golden Quarter’
Heavy discounting squeezes retailers’ margins further in the run up to ‘Golden Quarter’
- The British high street’s summer of disappointment continues into autumn as in-store sales record flat growth of just +1.8%
- Widespread online discounting boosted sales growth to +11.6%, but continues to squeeze retailers’ tight profit margins
- A disappointing start to the Golden Quarter dampens prospects for the Christmas period
Total retail sales grew by +4.7% compared to September last year, according to BDO’s latest High Street Sales Tracker. This was largely driven by online sales growth in what was another disappointing result for high street stores in the lead up to the so called ‘Golden Quarter’.
Online sales growth of +11.6% is likely a result of substantial discounting as retailers try to clear high volumes of unwanted stock after a challenging summer.
Sophie Michael, Head of Retail and Wholesale at BDO, commented: “These results reflect recent reports that retailers have been cutting prices in categories like fashion and homewares to clear their unwanted stock before product lines change for autumn and winter, ahead of the Christmas period.
“However, while this aggressive discounting may have driven cash flow in the short-term, it means that retailers’ margins are under more pressure than ever. With sales growth in stores of just +1.8% compared to September 2023, it’s clear that retailers are still struggling to get shoppers out onto the high street – and crucially, to purchase items in-store.
Ms Michael added: “These sales figures may appear positive at first glance, but they show clear issues for the sector as we approach the most critical time of year. The reliance on discounted online sales to drive growth is not only putting huge pressure on retailers’ margins, but it is also a very costly way of doing business because of the high level of returns. It simply isn’t sustainable.
“The Government has said it will have to take some difficult decisions in the upcoming Autumn Budget, which may lead to consumers further tightening their purse strings. Retailers will face increased competition for discretionary spending from hospitality and leisure in the build up to Christmas, particularly if consumers prioritise spending on experiences than products.”
Key data points (compared to September 2023):
- Total life-for-like sales grew by +4.7%
- Online sales across all categories grew by +11.6%
- In-store sales grew by just +1.8%
- Fashion sales in-store grew by just +1.4%
- In-store sales in the lifestyle category grew by +1.2%
- Homewares sales across online and in-store decreased by -2.5%
Note to editors
Accountancy and business advisory firm BDO LLP provides integrated advice and solutions to help businesses navigate a changing world.The organisations we work with are Britain’s economic engine; entrepreneurially-spirited, high-growth businesses that fuel the economy.
We understand the ambitions and entrepreneurial mindset of those we work with and have the global reach, integrity and expertise to help people and businesses succeed.
BDO LLP
BDO LLP operates in 18 offices across the UK, employing 8,000 people offering tax, audit and assurance, and a range of advisory services. BDO LLP is the UK member firm of the BDO international network.
BDO’s global network
The BDO global network provides business advisory services in 166 countries and territories, with more than 115,000 people working out of 1,776 offices worldwide. It has revenues of US$14bn.
Contacts
Ellie TudorTel: 07398 345137
Email: BDO@launchpr.co.uk
Press office
Email: media@bdo.co.uk