EY comments on today’s ONS retail sales figures for October

“Although retail sales rose slightly in October, they continued their broad downward trajectory – coming in lower than they were in August – as consumers continued to cut back on discretionary spending on ‘big ticket’ items.

“The unseasonably warm autumn weather meant shoppers may have delayed buying their winter wardrobes, placing further pressure on many retailers and brands already contending with falling consumer confidence. As a result, we are seeing numerous retailers heavily discounting ahead of Black Friday on 25 November. Many will be hoping the start of the 2022 World Cup will offer a much-needed boost, particularly to food store sales which fell by 1% in October.

“The announcement in yesterday’s Autumn Statement that energy bills support will be scaled back in April 2023, as well as the freeze on income tax thresholds, is likely to further dampen consumer confidence at a critical time for the retail sector. 

“Falling consumer confidence is now having a clear impact on retailers’ bottom lines. EY-Parthenon’s latest Profit Warnings analysis for Q3 2022 found that over 40% of FTSE Retailers issued a profit warning in the last 12 months as spiralling costs, supply chain and labour challenges combined with shrinking demand.

“Now, more than ever, retailers need to ensure they have a differentiated pricing strategy in place which secures consumer demand and allows them to pass on price increases to certain customer segments. They also need to ensure they have cash management plans in place to free up working capital which will be vital to surviving a challenging winter.”