So Sir Terry Leahy says consumer confidence is on the way back up, and this week’s BRC sales figures showed that shoppers returned to the high street in healthy numbers in September. At the same time, retailer after retailer is reporting strong performances.
In this issue, we feature Sainsbury’s, Clinton Cards, Carphone Warehouse, N Brown and Harrods – companies with nothing in common other than that they are all retailers and all producing top-drawer performances. Meanwhile, on Tuesday, 150,000 people packed the new Westfield shopping centre in Derby on its opening day (page 14).
Time to put the champagne on ice ready to celebrate a record Christmas, then? You’ve got to be kidding. Given retailers’ comments from across the market this week, Leahy might as well be on another planet. There is a lot of anxiety around and, anecdotally, many multiples are finding the going very hard indeed.
September was a month of recovery after the bizarre summer conditions. The arrival of autumn weather meant that, for the first time in months, the weather was what retailers would expect for the season. This drew the shoppers out, but could quite easily be a temporary blip and, as the BRC pointed out this week, a large amount of the activity is down to discounting.
Retailers need a healthy degree of caution. Leahy himself has built Tesco’s success on a culture of paranoia about where the next banana skin is coming from. But there are sound reasons for retailers to be worried that consumer confidence is delicately poised.
The consensus might be that interest rates have peaked, but homeowners are still trying to digest five interest rate rises, which are hitting more people every month as fixed-rate periods come to an end. There has been a run on a UK bank for the first time in living memory and the ongoing uncertainty in the finance world will do nothing for confidence.
Consumer spending cannot grow in a vacuum, isolated from wider economic trends forever. Let’s hope the positive September showing can be sustained. But the basic laws of economics mean that sensible retailers are right to be cautious.
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