Retailers face tough start to year

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Scottish retailers suffered a “difficult” start to the new year, according to figures published today that show sales declined at a faster pace last month.

However, there were signs of improving conditions in the hard-pressed grocery sector, which has come under intense pressure amid the ongoing supermarket price war.

KPMG's David McCorquodale spoke of 'difficult January'. Picture: Julie Bull

KPMG's David McCorquodale spoke of 'difficult January'. Picture: Julie Bull

According to the latest report from the Scottish Retail Consortium (SRC) and KPMG, total sales north of the Border dropped 2.3 per cent in January. In contrast, sales for the UK as a whole were up 1.6 per cent on a year ago.

David McCorquodale, head of retail at KPMG, said: “2015 got off to a difficult start for Scottish retailers. Whilst the decline may be partly explained by more inclement weather this year and January being a strong month for sales last year, it is clear that the considerable saving felt by consumers in petrol and fuel bills is not finding its way to the high street’s tills.”

In the non-food sector, hair and beauty retailers had a strong month as hand cream sales picked up as the cold set in, but elsewhere sales of electricals slowed in the wake of November’s “Black Friday” discounts.

Although food sales in Scotland fell by 1.4 per cent in January, this was an improvement on the previous month’s 1.9 per cent slide and marked the best performance since June 2014.

On a like-for-like basis, which strips out the effect of store openings and closures, food takings were down 2.4 per cent.

McCorquodale added: “It may be some time till we herald growth again in this competitive market, which is also buffeted by price deflation, but the grocers will take heart that the worst may be in the past.”

Figures released last week by market researcher Kantar Worldpanel showed that the UK’s supermarket sector grew by 1.1 per cent in the past three months as lower fuel and food prices spurred consumers to increase their grocery spending.

Fierce supermarket competition meant that the grocery sector was Scotland’s strongest performer last month, even though food sales have been negative for nine months in a row.

SRC director David Lonsdale said: “While sales of food edged down, it was nonetheless the best-performing category – for the first time in four months – and recorded its best performance since last June. Looking forward, retailers will be heartened by the Bank of England’s predictions of continued low inflation being outstripped by average pay rises.”

He added: “The Chancellor should seek to bolster this in his Budget next month with policies which stimulate retailers to invest and which boost disposable incomes such as reducing income taxes on low earners.”

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