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Industry News

Published on May 24th, 2019 | by The GC Team

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Retail health hovers just above historic low

Retail health deteriorated further in the first quarter of 2019 as wavering demand, an increasing squeeze on margins and ever-higher costs resulted in a difficult trading environment for retailers.

According to the KPMG/Ipsos Retail Think Tank (RTT), the latest retail health index (RHI) score fell from 78 in the last quarter of 2018, to 77 in the first three months of 2019 – just one point above the historic low of 76 recorded during the double-dip recession of 2012/13.

Alongside multiple references to the later timing of Easter, which fell outside of Q1 this year, the RTT also cited the uncertainty of Brexit as a key cause of ill health during the first quarter of 2019. Maureen Hinton of Global Data said: “Major retailers have failed in recent months, and while that may in part be the fallout of a disappointing final quarter in 2018, we can’t overlook the fact that Brexit has added to consumer uncertainty, making shoppers more protective and selective of their discretionary spend.”

James Knightley, chief international economist at ING, maintained that the softened demand in retail experienced during the first quarter of the year nods to a peak in reservations around Brexit.

“This has no doubt meant that margins came under increased pressure, just as retailers grappled with the Brexit related inventory supply challenges and managing warehousing,” he added.

Looking ahead to the second quarter, the RTT was a little more optimistic, pointing to the later occurrence of Easter, brighter weather, the delay of Brexit and subsequent impact on the consumer psyche. However, while the quarter holds more promise, it is predicted that retail health will remain static at best due to increased costs for retailers – holding the Index score at 77.

Paul Martin, co-chair and UK head of retail at KPMG, said: “The Easter sunshine will surely have provided many retailers with a positive start to the second quarter of 2019. However, while some measures may suggest that this has indeed been the case, retailers cannot hide from the continuing consumer uncertainty and, importantly, the ongoing structural changes within the sector which remain a key driver of instability.”

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