Press release

22 Jul 2022 London, GB

EY comments on ONS retail sales figures for June

Silvia Rindone, EY UK&I Retail Lead, comments:

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Silvia Rindone, EY UK&I Retail Lead, comments: “Despite the long Jubilee bank holiday weekend at the start of June, today’s ONS retail sales data shows that consumers are feeling the pinch from the rising cost-of-living and are becoming more cautious about where and when they are spending. EY’s latest Future Consumer Index (FCI) found that 37% of low- and middle-income consumers are now only purchasing the essentials, compared to 26% in the last survey in February 2022, while 44% of low-income consumers are expecting their financial situation to worsen in the next 12 months. In stark contrast, just 15% of high-income consumers expect to be financially worse off in the next 12 months with 61% of this income bracket saying they are excited about spending money on things that will improve their lifestyle.

“The FCI data also highlights the growing disparities between these low-income consumers who are preparing to tighten their grip on finances and high-income consumers who are able to maintain spending levels – typical of a K-shaped recovery in which different groups experience different rates of recovery after a recession.

“A fall in consumer confidence is now having a clear impact on retailers’ bottom lines. EY-Parthenon’s profit warning analysis, released earlier this week, shows that half of all profit warnings issued in H1 2022 came from consumer-facing sectors, compared to a third in H1 2021, with most citing rising costs as the reason for the warning. The research underlines the difficulties companies face when trying to pass price increases on to consumers who are reducing their spending levels, which, in turn, is creating tensions along the supply chain and leading to high levels of unsold stock.

“Online retail sales also continued their downward trajectory. This was also reflected in the profit warnings analysis, with three-quarters of the FTSE Retailers issuing a warning in H1 2022 coming from companies which operate exclusively or mostly online. These companies have been particularly affected by the shift in sales back to ‘bricks and mortar’ stores and have been disproportionately affected by increasing delivery costs and product returns. 

“Companies which are managing to adapt to the challenges are those developing robust plans to manage cost inflation and who have strong processes in place around cash management and inventory visibility. They also need to ensure they address consumers’ affordability concerns by selecting the right value strategy to retain cost conscious shoppers such as offering value for money or ‘own label’ options.”