Blackfriar: Retailers face a mixed future due to Brexit fallout

The next hurdle for '‹the pound will be ONS retail statistics which are due out at 9.30am today. A modest recovery'‹ in June'‹ is expected after sharp declines in May.
8th April 2014
Sneak preview of the new John Lewis store, York
Pictured interior of new store
Picture by Gerard Binks.
GB100144h8th April 2014
Sneak preview of the new John Lewis store, York
Pictured interior of new store
Picture by Gerard Binks.
GB100144h
8th April 2014 Sneak preview of the new John Lewis store, York Pictured interior of new store Picture by Gerard Binks. GB100144h

It appears that UK retail​ers are bearing the brunt of the political shenanigans of the last year.

Analyst Clive Black at Shore Capital sums it up well: “If the EU-UK Referendum in 2016 was not bad enough​, the retail sector​ had to face into Mrs May’s electoral farce last month.

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“Maybe folks are becoming more resilient to the political shocks that they create through their voting patterns, the footfall data released for June suggests so, with robust growth in retail parks and the high street.​“

It appears that we are in for months, if not years, of uncertainty over the Brexit outcome and this means difficult times for retailers.

Last week John Lewis, Britain’s largest department store chain, reported a fall in demand for big ticket items as consumer confidence fades​. ​

Shoppers are feeling the impact of subdued wage growth, concerns over Brexit, the outcome of the General Election, the recent terror attacks and creeping inflation. Recent surveys have shown a sharp drop in consumer confidence.​

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John Lewis’s managing director Paula ​Nickolds​ ​​said: ​“The backdrop is very uncertain and it was made worse by the tragic events that happened across British cities over the last few months.

“Customers​ ​feel uncertain and worried about what the circumstances will mean for their future financial prosperity. It’s the more considered categories, the arguably deferrable spend, that we’re seeing most affected​ by the uncertainty in the macro conditions - so those big ticket categories are currently trading just behind last year​.”

John Lewis has warned of “turbulent and challenging” times ahead and predicted there will be casualties on the high street as Britain prepares to leave the EU.

Ms Nickolds said that the difficult retail market will be a major challenge over the next year. Asked whether some retailers will go bust, she said: “There will be casualties. Of that I’m sure. Returns in retail have got smaller.”

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So which retailers are likely to survive in this tough economic environment? The supermarkets are expected to continue to do well. Whatever happens to the economy we still have to eat and the supermarkets managed to survive and thrive during the financial crisis nine years ago.

Recent data shows that people are dining out less frequently, which should boost the supermarkets’ luxury ranges. This is already being seen at Morrisons where a revamp of its The Best range saw it winning Own Label Range Of The Year at the recent Grocer awards​.

In addition to the supermarkets, stores that offer a leisure experience - rather than just handing over money for goods - should do well.

John Lewis ​has hailed the success of its flagship store in Leeds and said it has created a day out experience for shoppers across Yorkshire.

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“​Leeds ​is our most experience led store. This year we will open a roof top restaurant that will take advantage of the fantastic views​ of Leeds and make the most of the city’s night life,” said Ms Nickolds.

​“Our Leeds store is all about creating a destination - a day out experience. That’s what department stores were all about.”​

​The store is the retailer’s most service-led shop, offering services such as a beauty spa, a foreign exchange and a home design service.

Retailers that offer the basics that we can’t live without such as food and those that offer us a feel-good factor will be the winners during the difficult times ahead.

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