Retailers "feeling quite optimistic" ahead of Christmas as retail sales rise

The CBI’s latest Distributive Trades Survey revealed that business sentiment about the retail sector for the coming three months is positive for the first time since August 2007.

Around 40 per cent of those who responded to the survey said that their volume of sales in the year to November had risen, while 27 per cent said sales had fallen. A positive balance of 13 per cent is the second month of growth in a row, although not as strong as the 19 per cent expected. The last time the balance was so strong was in November 2007.

A balance of 19 per cent of retailers said that sales volumes would improve compared with December last year.

The CBI said that the high street is “feeling quite optimistic” thanks to the growth in sales.

The volume of orders place on suppliers was up by a balance of 12 per cent for the first time since January 2008, and was the highest since November 2007.

Encouragingly, only a net two per cent of firms said that sales were poor for the time of year, better than a predicted balance of seven per cent. A net three per cent of companies said they expect sales to be above the seasonal norm for December.

The CBI’s survey found that the three month moving average of sales volumes turned into a positive balance of eight per cent and is expected to reach 14 per cent in December.

A balance of eight per cent of companies said that existing stocks are enough to meet demand.

In the last quarter, a balance of 27 per cent said they had been required to cut jobs, a figure that is expected to be repeated in December. Despite this the figure is a significant improvement from the balance of 41 per cent in August who said they had to lay off workers.

Retail prices grew by a balance of 17 per cent, down from 23 per cent in the previous quarter. The figure is expected to be repeated in December.

Grocers, footwear and leather retailer saw strong sales growth in November. Durable household good, furniture and carpets also saw sales growth for a second month, but at a slower rate. Sales fell among clothing and hardware, china and DIY retailers.

In the wholesale sector sales volumes increased by a balance of four per cent, the first increase since May 2008 and motor traders saw year on year sales increase by a balance of 10 per cent, also the highest since May last year.

Andy Clarke, Chairman of the CBI Distributive Trades Panel and Chief Operating Officer of Asda, said, "It’s reassuring that the high street now has a second month of sales growth behind it, and it looks like December will be even better. A lot of retailers have suffered during 2009, and many are relieved that the year is ending on a more positive note.

“Despite the more upbeat mood and pre-Christmas sales growth, consumers are still worried about job losses and a weak economy. In 2010 the high street will find that recovery is fragile and slow.

“Christmas aside, this December will also be busy because shoppers are trying to beat the VAT rise in January, and many retailers are starting to target that behaviour.”

Richard Lowe, Head of Retail and Wholesale, Barclays said, "Christmas is in full swing on the high street, and retailers have their sights set firmly on bringing customers in-store to spend early with many opting to advance their seasonal sales or for flash discounting. Sales as a result are looking more healthy and retailers will be encouraged by rises in clothing and household goods sales. There is a continued positivity in sales figures in early November echoing those of September and October.

"Variable weather and spending habits have also had an effect on current sales performance. Over the last month anecdotal evidence has pointed to increases in weekend shopping, as well as consumer trends towards more self-indulgent Christmas spending on food and drink rather than gifts. The colder, wetter weather we are now experiencing in particular is likely to boost sales of clothing and other winter essentials, as shoppers finally prepare for the changing season.

"Carefully considering the New Year's forthcoming VAT increase, Christmas shoppers may be looking to purchase big-ticket items for themselves as well as the traditional items on their gift lists. Retailers have had all year to prepare for the return of VAT to at least 17.5%, with stocks now under much tighter control and their eyes fixed on margin management, the increase will come as less of a shock to the system than the sudden rate cut last year."