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Retail sales show unexpected bounce

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20/12/2018
UK retail sales showed surprising strength in November, beating economists’ forecasts by a significant margin.

After a lacklustre October, sales jumped 1.4% in November, equivalent to an annualised rise of 3.6%. Retail sales were supported by sales of household goods, which rose 5.3% over the month.

This is likely to have been a result of Black Friday deals, with consumers taking advantage of discounted prices to snap up white goods and other electricals.

Retailers said spending patterns continued to shift to sales occurring earlier in the year. The trend to online continues, with online sales as a proportion of all retailing exceeding 20% for the first time.

These stronger figures will provide some cheer for troubled retailers. On Monday, online retailer ASOS saw its shares crash 38% after a profit warning. The company had previously predicted full-year sales growth of 20-25%, and now expects growth of just 15%. At the same time, its profit margins halved as discounting became widespread.

The retail sector has been weak all year, with a number of retailers filing for bankruptcy and others, such as House of Fraser, succumbing to a takeover.

Ed Monk, associate director for Personal Investing at Fidelity International, said: “Christmas literally came early for UK retail, with sales in November jumping 5% in value and 3.6% in quantity compared to a year ago. That’s not unexpected given that November was boosted by Black Friday, which has brought forward the traditional Christmas sales glut by a month.

“It’s welcome news after a tough year for UK retail sector which has been undermined by tepid wage growth and Brexit worries. Traditional retailers with a presence on the High Street have been most at risk, and Fidelity’s real estate team predicts a steep fall in retail rents and property values because retailers simply cannot afford the high prices of rent on the high street.

“But we see today that many retailers aren’t putting up good fight. Their strategy thus far has been to extend Black Friday with early discounting throughout the month. That’s a squeeze on profits but good news, at least, for consumers who are finding more affordable prices.”

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