Coronavirus to take £12.6bn out of UK retail

Retail

Coronavirus to take £12.6bn out of UK retail

The impact of coronavirus (COVID-19) will wipe £12.6bn from retail sales this year, according to preliminary forecasts by GlobalData, a leading data and analytics company. This is equivalent to more than Aldi’s total UK sales last year.

Patrick O’Brien, UK Retail Research Director at GlobalData, comments: “While the food and grocery market will grow at 7.1% – the fastest rate for decades – this will not stop the overall market falling as non-food spend is forecast to drop by 8.9%. The impact on non-food is far worse even than during the financial crisis of 2009, when sales fell 2.9%. Clothing and footwear sales are forecast to be hit hardest, with sales down over 20% on 2019.”

The revised forecasts are predicated on the pandemic peaking in April with most stores either closed or severely affected until late May, with non-food spend starting to recover in June, but with more normal spending patterns not arriving until October.

Food and grocery: +7.1% (previous 2020 growth forecast +1.2%)

“The UK food and grocery market is now expected to grow at an unprecedented rate of 7.1% in 2020 – adding £6.8bn to the previous forecasted annual spend in 2020. This additional growth stems from a significant uplift in volume sales, as shoppers buy more than they need at supermarkets (particularly across food and household products), as well as gaining from consumers transferring spend from foodservice operators to supermarkets and other food retailers.”

Clothing and footwear: -20.6% (previous 2020 growth forecast +0.6%)

“Clothing and footwear spend is forecast to decline by £11.1bn in 2020, which represents a fifth lost off its market value and is equivalent to the combined clothing sales of the three market leaders Primark, Marks & Spencer and Next. Clothing and footwear will be the retail sector worst hit by the coronavirus in 2020, due to its non-essential nature and the eliminated need for new clothes as the public avoids social interactions and many self-isolate. This will cause the spring/summer season to be a write-off for apparel players.

“Retailers will be forced to cancel (as Primark has already done), postpone or redesign orders to avoid significant levels of terminal stock loss in June and July. We expect to see several fashion retailers collapse into administration as a result, with the sector already in a vulnerable state. Although the online channel will remain accessible to shoppers, we still expect to see a sharp decline in sales here as no amount of spare time at home to browse online will compensate for the lack of events to wear new clothes for.”

Total retail market: -1.7% (previous 2020 growth forecast +2.0%)

“The total retail market for 2020 is now estimated to reach £333.7bn from the original forecast of £346.3bn, which is 1.7% down on 2019 (GlobalData had originally forecast +2%). The company is currently forecasting a rebound in 2021 but only back to 2019 levels. When the health crisis recedes, there will be a recession to deal with, and consumer confidence will take a long time to recover.”

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