Record promotions drive retail growth

Total sales increased 2.5% in July, or 0.6% on a like-for-like basis.

Food sales increased 3.6% in the three months to July, compared with the same period a year ago, while non-food sales fell 0.4%.

The monthly figures show that clothing and footwear were helped by clearance sales while homewares sales were down and mostly promotion-led as consumers steer clear of big-ticket housing-related purchases.

Stephen Robertson, director general of the British Retail Consortium, warns that “conditions remain very difficult for retailers” as shoppers were only tempted into stores by an “unprecedented number of promotions which come at the expense of margins”.

He says: “Growing fears of a global economic slowdown and a sovereign debt crisis have sent shockwaves through financial markets.

Policymakers in Europe and the US must act quickly to implement a coordinated and credible strategy to reduce public sector deficits while supporting growth. Business and consumer confidence needs to be restored quickly before spending paralysis sets in.”

Talking about the continued use of sales and promotions despite the impact on margins, a BRC spokeswoman added: “Retail is a very competitive sector and at a time when disposable incomes are being stretched, retailers know that offering value is a crucial part of encouraging customers through their doors.

“The UK has a very established special offer culture that shoppers are familiar with and value highly. Individual retailers have to carefully balance the level of discount and promotion they can offer against being a profitable business.”

Heinz chief operating officer Matt Hill recently spoke to Marketing Week about the steep supermarket price promotions “destroying category value”.

The figures back up the BDO monthly high street tracker, which revealed yesterday (8 July) that early summer sales and wet weather boosted high street sales in July.