John Lewis reported a 7.9 per cent year-on-year fall in weekly sales on Friday, a further indication of the gloom hitting the UK’s high street after a week where major retailers unveiled weak results.
Stripping out value added tax (VAT) rises, sales were down 9.5 per cent.
The poor figures come after a week which saw the UK’s largest retailer, Tesco report a drop in sales, while Sainsbury’s saw only a marginal uplift, buoyed by promotions and new stores opening. High street fixture Mothercare issued a profit warning, while Halfords, Dunelm and Thorntons all reported falling underlying sales.
With consumer spending accounting for two-thirds of British gross domestic product (GDP), a slowdown in purchases of groceries, along with discretionary items, is alarming.
“Even allowing for footfall being hit by the very good weather, the sharp 7.9 per cent year-on-year drop in John Lewis sales in the week to October 1 fuels concern that consumers are reining in their spending – particularly on discretionary products - in the face of the persistent serious squeeze on their purchasing power and their major concerns over the economy, jobs and financial market turmoil,” Howard Archer, chief European and UK economist at IHS Global Insight said in a note to clients this morning.
“The serious squeeze on consumers’ purchasing power has if anything increased recently,” he added, noting that consumer price inflation rose to 4.5 per cent in the summer, against average earnings growth of under 2 per cent. With unemployment still high and inflation rising towards 5 per cent, conditions look set to worsen.