Retail Sales increase but profits remain squeezed

The statistics for Retail Sales have been released this morning, but even though the sales have increased in the sector for the 28th consecutive month, there is a chance that profits and margins are still being lost, say top retail accountancy experts at Wilkins Kennedy.

The key findings from the Retail Statistics showed:

• Quantities bought in the retail industry grew for the 28th consecutive month in July 2015. This was the longest period of sustained year-on-year growth since May 2008, when there were 31 periods of growth.
• Compared with June 2015, the quantity bought in the retail industry is estimated to have increased by 0.1%.
• The value of online sales increased by 13.0% in July 2015 compared with July 2014, however, there was no growth in July 2015 compared with June 2015. They accounted for 12.6% of all retail sales.

According to Phil Mullis, Partner and Head of Retail and Wholesale at top-20 UK accountancy firm, Wilkins Kennedy, there are questions as to whether the increase in sales has actually lead to bigger profits.

"No one is buying in much bigger quantities, otherwise the numbers would be much higher than 0.1%" comments Mr Mullis. "We as consumers can only consume so much, but what is happening is that people are spending more on bigger ticket purchases and retailers in this sector have reported an increase in sales".

"The fall in fuel prices and lower import costs make products cheaper to buy in the first place, although rents are still rising which currently offset the profit margins for many retailers. According to the latest insolvency statistics, the wholesale and retail sector accounted for the second highest number of liquidations in Q2 of 2015. That tells us the struggle for retailers is still alive and well, and despite the number of sales increasing, the numbers aren't quite reaching the bottom line."

"There is pressure for retailers to keep their prices low, but it means that many are still being priced out of the race and I think it will take us a while longer to get back to pre-recessionary figures" concludes Mr Mullis. "There are still many changes happening in the retail landscape at the moment. It will be interesting to see how the figures lay out for the rest of the year."