19 Jul 2012

Will the Olympics boost Britain’s damp retail sector?

Shoppers were rained away from the high street in June, figures show, but can the Olympics and Paralympics Games 2012 save retailers from the gloom?

Olympics at Westfield

Figures from the Office of National Statistics show retail sales increased by just 0.1 per cent in June compared with the month before. Compared with June 2011 sales were 1.6 per cent higher.

Poor wet weather and a lower than expected impact from the Diamond Jubilee celebrations were the causes of the damp performance. At the same time figures from three major UK retailers show a gloomy picture of declining sales in the tough economic environment.

Mothercare said retail sales were down 4.4 per cent over the 15 weeks to mid-July and Kingfisher Group, owner of B&Q and Screwfix, said like-for-like sales were down 0.4 per cent in the ten weeks to July 7.

Kingfisher’s French business was worst affected, seeing a 2.3 per cent drop in sales.

We are definitely anticipating some more retailers to get into financial difficulties this year – Dan Norris, Hogan Lovells

Automotive and leisure retailer Halfords Group suffered a 5.6 per cent like-for-like drop in sales. David King (pictured below), group chief executive, will also leave the business with immediate effect.

Olympic gains?

However, despite a spate of retail administrations at the start of the year, including big high street names such as Peacocks, Clinton Cards and Blacks Leisure, the second quarter has been quieter in terms of retailers experiencing financial woes.

And with just over a week until the start of the Olympics and Paralympic Games 2012 in London, some retailers are believed to be crossing their fingers for a much needed retail boost.

Ian Geddes, head of UK retail at financial advisory firm Deloitte, said the Olympic and Paralympics Games will provide a “short term opportunity to boost trading”.

“Looking forward, this weekend sees the first of six Sundays with extended trading hours, lasting the duration of the Olympic and Paralympic Games,” he said.

The extent of the rain in recent months has largely drowned demand for summer goods – Stephen Robertson, British Retail Consortium

“This change in regulation should allow retailers to benefit further from the thousands of visitors to the UK this summer.”

Time for plan B?

Dan Norris, an insolvency expert and partner at law firm Hogan Lovells agreed that the Games could provide a temporary panacea for the retail industry.

David King

However, he said that the company is expecting to see more retailers go into financial difficulties and said that many retailer may be deciding how to proceed based on the impact of the summer of sports.

“We are definitely anticipating some more retailers to get into financial difficulties this year,” he said. “I think retailers will see how they trade through the Olympic period and if things don’t go well then they’ll see about a plan B before the next rent payment date.”

He added that there are plenty of retailers who are unlikely to benefit from the Olympics, such as carpet retailers and home furnishings businesses. These retailers have been suffering since the start of the recession.

He said: “It’s the retailers in places like Westfield Stratford City and on Oxford Street that will see the most benefit, as well as the leisure sector – particularly restaurants, bars and hotels. For those not likely to benefit, times must be tough which you can tell from the interest free credit deals on offer.”

No pain, no rain

But Stephen Robertson, director-general of the British Retail Consortium, said what the industry really needs is some sunshine.

“Our results show people splashed out during the few sunny days ahead of the long weekend but the extra bank holiday made little difference, he said.

“The extent of the rain in recent months has largely drowned demand for summer goods. Retailers with unsold shorts, sandals or garden furniture are now pinning their hopes on a decent late spell of sunshine to clear space for autumn ranges.”

The ONS figures showed that food stores suffered the most in the period, partly due to the like of people holding barbeques, with a 0.7 per cent year-on-year drop. Sales for vehicle fuel suffered a 4.6 per cent drop.

Clothing stores, however, performed better with a 2.4 per cent year-on-year rise.