All is not well on Britain’s high streets.
Bellwether Next last week lowered its sales forecasts for the second time this year and warned that this might not just be down to recent cold weather — there could be a broader consumer slowdown going on, too.
Store chains BHS and Austin Reed have gone into administration.
However, the picture of the consumer is puzzling. It appears Britons are snapping up Rolexes and Range Rovers, but are shopping at discount supermarkets and are prepared to wear last year’s fashions. That is a problem for store groups and investors alike. Turning traditional spending patterns on their head makes it harder to judge where the British consumer’s headed next.
Britons have regained spending power over the past year or so as wage growth picked up and inflation cooled.
However, spending has not been spread evenly. Though demand for Swiss watches has slumped in Hong Kong and China, the British can not get enough of them. Swiss watch exports to the UK were up 25.8 percent in December last year. Overseas travelers might be playing a part, but one jewelry retailer said Rolex sales have gone through the roof both in and out of London.
Luxury cars are another recent favorite. A 2 percent increase in registrations across all manufacturers last month belies a 19.8 jump in registrations of new Mercedes and a doubling of Jaguar sales.
Yet, Britons are happy to scrimp in other ways. They have flocked to the German no-frills supermarkets Aldi and Lidl over the past few years. Although their sales growth has started to slow — perhaps the result of the traditional supermarkets engaging in a vicious price war — a raft of new stores suggests they are still continuing to win customers.
Another area where Britons seem more careful is clothing. UK high streets suffered their sharpest drop in sales since the depths of the 2008-2009 financial crisis, according to BDO, which tracks the sales of medium-sized retailers, with a combined 10,000 stores. Fashion sales last month dropped 9.2 percent, the biggest decline since February 2009.
However, the larger point is that consumer-facing businesses have had a good run. From EasyJet to Costa Coffee-owner Whitbread PLC, companies have benefited from the economic recovery and stronger spending power.
The question now is whether even the stronger parts of the consumer economy might be coming off the boil — new car registrations cooled last month, as did Swiss watch imports in March. It should become clearer once the referendum on EU membership has passed.
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