DIpil Das
In October, total UK retail sales jumped by 8.4% year over year—the fastest pace recorded by the ONS since April 2014. Growth was supported by substantial year-over-year increases in DIY and hardware stores, electrical goods retailers, floorcovering specialists and health and beauty retailers. Early shopping for the holidays appears to have underpinned the surge in sales.
On October 31, UK Prime Minister Boris Johnson announced a four-week lockdown in England. This lockdown forced nonessential retail stores to close from November 5 to December 2. A four-week lockdown will be disastrous for the retail sector overall. We can expect to see substantial year-over-year sales declines across the store-based nonfood retail sector in November 2020. However, demand for Christmas gifts and other holiday-related purchases may prove more resilient—and so total declines during the second lockdown could be less negative than those during the first lockdown (the impact of which is charted below).
[caption id="attachment_119735" align="aligncenter" width="700"]
Data in this report are not seasonally adjusted
Source: ONS/Coresight Research [/caption] Retail Sales Growth by Sector October was a very strong month for UK retail, supported by consumers apparently shopping early for the holidays, but a November lockdown means this will not prove typical of the holiday period overall. In October, small retailers strengthened sales growth to 18.8% (small clothing retailers were one exception—sales fell by double digits in this sector, as shown in the table below). Large retailers, which account for the bulk of the retail sales, posted total growth of 5.5% in October versus 3.8% in September. The ONS reported double-digit growth for big-ticket sectors—electrical goods retailers, DIY retailers and floorcovering stores. Health & beauty and online-only retailers also posted double-digit growths in October. DIY and hardware sector maintained its winning streak, surging 31.7% in October, compared to 26.8% in September. Home-improvement group Kingfisher, which owns B&Q and Screwfix in the UK, reported comparable sales growth of 19.8% in the UK and Ireland in October. Hardware retail and garden centers are considered “essential” in the second lockdown, allowing these stores to stay open. Kingfisher reported that it saw exceptional demand in the UK in the first week of November, particularly at B&Q, ahead of the commencement of the new lockdown. Growth at grocery stores witnessed modest improvement, with sales up 4.5% in October. However, we expect more significant growth in November following the closure of food services such as bars and restaurants, as part of the lockdown restrictions. Health and beauty saw a sharp growth spike, of 19.4%, in October, compared to 14.5% in September. Sales at clothing and footwear stores were still down in October, although the sector saw sequential growth improvement since the easing of the first lockdown. Growth at department stores turned positive for the first time since April; this sector comprises full-range department stores such as John Lewis and variety-stores such as Argos and B&M Bargains. After witnessing growth soften for three consecutive months, online-only retailers’ growth accelerated again, expanding 47.6% in October. We expect growth at online-only retailers to accelerate further in November, boosted by new lockdown restrictions.
Figure 2. UK Retail Sales, by Sector: YoY % Change [wpdatatable id=567 table_view=regular]
*A small retailer is defined as one with fewer than 100 employees or with revenues of £60 million or less per year; all others are large retailers **A relatively fragmented sector, in which reported figures have traditionally been volatile Source: ONS Online Retail Sales Account for 28.1% of All Retail Sales Total online retail sales were up 59.7% year over year in October, compared to 52.7% in September. At food retailers, Internet sales were up 99.0% in October, versus 91.6% in September. In October, Internet sales were up 64% at store-based nonfood retailers, versus 61.7% in September, supported by strong sales at non-specialized stores, which were up 87.2%. Online sales jumped 48.0% at nonstore retailers. Online retail sales as a percentage of overall retail sales increased again after trending downward for four consecutive months. Online sales accounted for 28.1% of all retail sales in October, up from 26.1% in September. We chart the trend for all retail and the store-based food and nonfood sectors below. [caption id="attachment_119684" align="aligncenter" width="700"]
“Food” and “Nonfood” data are for store-based sectors; “All Retail” total includes nonstore retail, which is not charted
Source: ONS [/caption] Covid-19 Lockdown Timeline The UK was put into lockdown on March 23, initially for three weeks in an attempt to limit the spread of coronavirus, shuttering down non-essential retail stores. On April 16, the government announced to extend the lockdown by another three weeks. On May 11, Prime Minister Boris Johnson announced that the government would begin easing the restrictions in a phased manner, allowing nonessential stores to reopen from the start of June. However, garden centers were allowed to reopen from May 13 and furniture stores from May 23. On May 26, the government followed by announcing that all nonessential retailers in England and Northern Ireland, including department stores and small independent shops, will be allowed to reopen from June 15, given that stores implement measures to meet the necessary social distancing and hygiene standards. On June 23, Johnson announced that restaurants, pubs, museums, cinemas and hotels can reopen on July 4. On September 14, a new “rule of six” prohibited social gatherings of more than six people, unless they are from the same household. On September 22, Johnson outlined a slew of new restrictions in the wake of a fresh spike in the number of infections. These included the closing of bars, pubs and other hospitality services by 10:00 p.m., effective September 24. On October 7, the Scottish government implemented tighter restrictions, largely on the hospitality industry. Retail was not directly affected, although stores were requested to enforce two-meter distancing. On October 12, the UK government announced a three-tier lockdown system, which classifies regions based on the severity of infection rates. In the week beginning October 19, a number of regions in England, including London and Manchester, moved into higher “tiers” of control, which include restrictions on households mixing and, in some cases, some service industries; however, these did not change the direct rules for retailers. On October 23, a 17-day lockdown began in Wales, with nonessential retailers being forced to close once more. On October 31, Johnson announced a second lockdown for England for the period November 5 to December 2. All nonessential retail must close, “including, but not limited to, clothing and electronics stores, vehicle showrooms, travel agents, betting shops, auction houses, tailors, car washes, and tobacco and vape shops.” Food shops, supermarkets, garden centers and certain other retailers providing essential goods and services can remain open. Hospitality venues such as restaurants, bars and pubs must close but can still provide takeaway and delivery services.
Data in this report are not seasonally adjusted Source: ONS/Coresight Research [/caption] Retail Sales Growth by Sector October was a very strong month for UK retail, supported by consumers apparently shopping early for the holidays, but a November lockdown means this will not prove typical of the holiday period overall. In October, small retailers strengthened sales growth to 18.8% (small clothing retailers were one exception—sales fell by double digits in this sector, as shown in the table below). Large retailers, which account for the bulk of the retail sales, posted total growth of 5.5% in October versus 3.8% in September. The ONS reported double-digit growth for big-ticket sectors—electrical goods retailers, DIY retailers and floorcovering stores. Health & beauty and online-only retailers also posted double-digit growths in October. DIY and hardware sector maintained its winning streak, surging 31.7% in October, compared to 26.8% in September. Home-improvement group Kingfisher, which owns B&Q and Screwfix in the UK, reported comparable sales growth of 19.8% in the UK and Ireland in October. Hardware retail and garden centers are considered “essential” in the second lockdown, allowing these stores to stay open. Kingfisher reported that it saw exceptional demand in the UK in the first week of November, particularly at B&Q, ahead of the commencement of the new lockdown. Growth at grocery stores witnessed modest improvement, with sales up 4.5% in October. However, we expect more significant growth in November following the closure of food services such as bars and restaurants, as part of the lockdown restrictions. Health and beauty saw a sharp growth spike, of 19.4%, in October, compared to 14.5% in September. Sales at clothing and footwear stores were still down in October, although the sector saw sequential growth improvement since the easing of the first lockdown. Growth at department stores turned positive for the first time since April; this sector comprises full-range department stores such as John Lewis and variety-stores such as Argos and B&M Bargains. After witnessing growth soften for three consecutive months, online-only retailers’ growth accelerated again, expanding 47.6% in October. We expect growth at online-only retailers to accelerate further in November, boosted by new lockdown restrictions.
Figure 2. UK Retail Sales, by Sector: YoY % Change [wpdatatable id=567 table_view=regular]
*A small retailer is defined as one with fewer than 100 employees or with revenues of £60 million or less per year; all others are large retailers **A relatively fragmented sector, in which reported figures have traditionally been volatile Source: ONS Online Retail Sales Account for 28.1% of All Retail Sales Total online retail sales were up 59.7% year over year in October, compared to 52.7% in September. At food retailers, Internet sales were up 99.0% in October, versus 91.6% in September. In October, Internet sales were up 64% at store-based nonfood retailers, versus 61.7% in September, supported by strong sales at non-specialized stores, which were up 87.2%. Online sales jumped 48.0% at nonstore retailers. Online retail sales as a percentage of overall retail sales increased again after trending downward for four consecutive months. Online sales accounted for 28.1% of all retail sales in October, up from 26.1% in September. We chart the trend for all retail and the store-based food and nonfood sectors below. [caption id="attachment_119684" align="aligncenter" width="700"]
“Food” and “Nonfood” data are for store-based sectors; “All Retail” total includes nonstore retail, which is not charted Source: ONS [/caption] Covid-19 Lockdown Timeline The UK was put into lockdown on March 23, initially for three weeks in an attempt to limit the spread of coronavirus, shuttering down non-essential retail stores. On April 16, the government announced to extend the lockdown by another three weeks. On May 11, Prime Minister Boris Johnson announced that the government would begin easing the restrictions in a phased manner, allowing nonessential stores to reopen from the start of June. However, garden centers were allowed to reopen from May 13 and furniture stores from May 23. On May 26, the government followed by announcing that all nonessential retailers in England and Northern Ireland, including department stores and small independent shops, will be allowed to reopen from June 15, given that stores implement measures to meet the necessary social distancing and hygiene standards. On June 23, Johnson announced that restaurants, pubs, museums, cinemas and hotels can reopen on July 4. On September 14, a new “rule of six” prohibited social gatherings of more than six people, unless they are from the same household. On September 22, Johnson outlined a slew of new restrictions in the wake of a fresh spike in the number of infections. These included the closing of bars, pubs and other hospitality services by 10:00 p.m., effective September 24. On October 7, the Scottish government implemented tighter restrictions, largely on the hospitality industry. Retail was not directly affected, although stores were requested to enforce two-meter distancing. On October 12, the UK government announced a three-tier lockdown system, which classifies regions based on the severity of infection rates. In the week beginning October 19, a number of regions in England, including London and Manchester, moved into higher “tiers” of control, which include restrictions on households mixing and, in some cases, some service industries; however, these did not change the direct rules for retailers. On October 23, a 17-day lockdown began in Wales, with nonessential retailers being forced to close once more. On October 31, Johnson announced a second lockdown for England for the period November 5 to December 2. All nonessential retail must close, “including, but not limited to, clothing and electronics stores, vehicle showrooms, travel agents, betting shops, auction houses, tailors, car washes, and tobacco and vape shops.” Food shops, supermarkets, garden centers and certain other retailers providing essential goods and services can remain open. Hospitality venues such as restaurants, bars and pubs must close but can still provide takeaway and delivery services.