The better than expected performance of the retail sector is a sign consumer confidence could be picking up, according to analysts at Grant Thornton.
The proportion of negative trading statements issued by retailers listed on the London Stock Exchange during the first quarter of 2009 has not exhibited the expected further rate of retail decline that some analysts had predicted.
Grant Thornton’s index of quoted retail companies for the first quarter of 2009 found that 25 per cent of retailers posted negative trading updates during this period, only marginally up from 23 per cent in the same trading period the year before.
The firm said it was encouraging that this performance is slightly better than the last quarter of 2008 when 27 per cent of retailers reported negative trading statements.
However, the number of positive statements has dropped to 27 per cent in the first quarter, a ten per cent decrease from the same period last year.
David Munton, partner at Grant Thornton in Birmingham, said: “These results are the first indication that perhaps the decline in consumer confidence over the last 18 months has reached a turning point.
“The statistics are similar to quarter four 2008. That quarter’s results included the all-important Christmas results, which were not as disastrous as many analysts were predicting.”
Food and drink retailers continue to perform well despite the economic downturn. Four out of five food retailers who posted results in this trading period increased their sales in the last quarter. These included Tesco, J Sainsbury, Morrisons and Greggs.
Birmingham-based Phil Jackson, who in addition to leading Grant Thornton’s regional corporate finance team also heads the firm’s food sector group, said: “The food sector tends to be relatively resilient in a downturn, although consumers focus more heavily on price and are generally spending less.
“However, food sales statistics inevitably are feeling the impact of continued food price inflation, with the cost of an average basket of foods increasing by 14 per cent, year on year, according to a recently published survey.
Mr Munton added: “The better retailers are still standing having taken appropriate cost cutting measures and product ranging decisions. They have picked up market share from weaker competition which in many cases have fallen into administration over the last few months.
“There also appears to be the first signs of some revival in the UK housing market, if the increase in February in the number of new mortgages granted month on month is to be believed.
“This gives hope to retailers which sell homeware and household products. In this recession, there are consumers out there who do have money to spend despite much comment to the contrary.
“These shoppers may have tracker mortgages, could be in secure jobs that are attracting pay rises despite zero inflation or are younger and more affluent consumers who are not as worried about losing their jobs and do not have dependents or heavy financial commitments.
“The stronger retailers continue to tap into these key consumer groups by displaying a strong overall offer.”