April's retail sales figures better than expected but the fight for survival goes on

Commenting on today’s retail sales figures for April released by the Office of National Statistics, Andrew Westbrook, RSM’s head of retail said:

‘Retail sales were slightly better than expected in April giving operators a chance to partially recover from the poor weather in March. In April 2018, the quantity bought and amount spent by shoppers increased by 1.4 per cent and 3.5 per cent respectively when compared with the same month last year. 

‘However, while these numbers are encouraging, there is still a Darwinian struggle taking place on the UK high street. 

‘Many UK retailers are still reeling from the announced closure of 100 M&S stores by 2022. While this is bad news for M&S staff and its loyal customers, there’s also a damaging knock-on effect for other high street operators which rely on anchor tenants to draw in the punters. 

‘The British Retail Consortium warned this week we can expect the high street of the future to look very different to how it looks now. In our view, the trend will be for more smaller format stores acting as showrooms for an integrated retail and online experience. 

‘How quickly retailers evolve and adapt to this new environment will determine their future. The woes affecting Debenhams, House of Fraser and M&S suggest the larger format stores are finding it harder to be nimble than their smaller cousins.

‘This fight for survival is being waged on two fronts. Firstly, retailers have to have a relentless focus on understanding and meeting the needs of their customers be it on or offline.

‘Second, they have to reduce their fixed costs. Many operators have recently taken the CVA route to close unprofitable stores and reach arrangement with landlords. To date, landlords have shown a willingness to be flexible, but inevitably, this has left healthier companies still paying the full rent to cry foul. 

 

Retail landlords need to brace themselves for an increasing number of demands, but they face a difficult decision. Do they agree to reduce rents to retain their tenants or do they run the risk that their portfolio of stores will sit empty? If there’s one thing retail landlords fear more than anything, it’s the curse of the vacant unit. 

 

‘Looking ahead, there are some grounds for optimism. Some retailers are defying the odds and posting record results. Shoppers – and millennials in particular - still value the high street and it remains a popular leisure destination. Wage inflation is beginning to overtake price inflation and the anticipated interest rate rise appears to be on hold. 

‘The sales for the month of May could well be much brighter, buoyed by the tropical temperatures over the May Bank Holiday weekend and the excitement surrounding the Royal Wedding. While the Markle Sparkle may not have spared M&S its recent woes, other retailers could well have experienced a much-needed boost.’