Golden quarter begins on shaky ground

British retail has had a slow start to the ‘Golden Quarter’. Total like-for-like (LFL) sales in consumer cyclical categories – including fashion, household goods and lifestyle – were largely flat in October at minus 0.02 percent. This ends a streak of four consecutive months of positive sales growth. Persistent inflation and weak consumer confidence are weighing on spending, according to BDO’s High Street Sales Tracker.

Although overall sales remained stagnant, there was a clear divergence between sales channels. Sales in stationary retail continued to show a certain degree of resilience. They rose 1.1 percent and outperformed online retail for the second month in a row. This suggests that consumers are still making thoughtful purchases in physical stores despite broader economic pressures. This may apply to fashion essentials as they transition their wardrobe for fall and winter.

However, the monthly data shows an “uneven” picture. Sales weakened in the first and last weeks of October. In the last week, which coincided with the school holidays, sales fell in both brick-and-mortar and online retail. This suggests that families, feeling financial pressure, prioritized spending on experiences and travel over retail purchases. This trend has a direct impact on cyclical consumer goods categories such as fashion.

Sophie Michael, head of retail and wholesale at BDO, commented on the “frightening numbers” for retailers and highlighted the fragility of consumer confidence: “Consumers are still reeling from high inflation, particularly in food. At the same time, uncertainty about their household finances is keeping a tight grip on spending on consumer discretionary goods,” explained Michael. This cautious consumer behavior has resulted in essential goods and experiences being prioritized over non-essential goods, which is impacting the fashion industry.

The upcoming autumn budget, just days before Black Friday, creates additional pressure. Retailers, including those in the fashion industry, are faced with important investment and advertising decisions without clear financial policy guidelines. Michael expects “earlier and longer discount promotions to stimulate demand” but warns of the risks to margins. Fashion retailers must strategically consider promotions to retain customers while protecting profitability. This way you can avoid a difficult start to the new year.