The state of health in retailing deteriorated in the second quarter of the year and is set to decline further in the third, predicts the KPMG/SPSL Retail Think Tank.
Negative pressures, particularly on demand and margin, which were just beginning to be felt in Quarter 2 are forecast to amplify and hit retailers even harder in the months ahead.
Retailers finished Quarter 2 by deploying widespread sales to mitigate the effects of rising interest rates, falls in disposable income and the bad weather, says the RTT. This will have been enough to preserve many retailers’ sales growth. But the pain will be shifted to Quarter 3, when the full impact of heavy discounting and promotions to shift unsold summer stock will hit.
Demand is also likely to suffer as consumers are faced with yet another interest rate rise and other financial squeezes.
The RTT says costs continue to remain the most negative factor affecting retail health. It believes like-for-like cost growth is now between 3 and 4% and says sales are struggling to keep up. It concludes that in Quarter 3 retailers will be forced to sacrifice margin to stimulate falling demand.