No wonder the Chinese appear ready to snap up the toy store Hamleys for £100m. The latest retail sales figures indicate that Britain is heading for a glittering Christmas, with toys high on the list of purchases.
According to official data, the quantity of goods bought during September increased by 1.9%. That is a bumper rise in just one month and sets the UK on course for a bigger than expected Christmas season, kicking off with Black Friday on 27 November.
Admittedly, as the consultancy Capital Economics pointed out, a punchy 2.3% rise in food sales was probably bolstered by one-off factors, such as the Rugby World Cup and the timing of the August bank holiday. The latter fell on 31 August this year and was therefore included in September’s figures.
Some other surveys also point to the possibility of yuletide consumer restraint.
Earlier this week, the financial data provider Markit published its household finance index for September, showing a weakening in sentiment since August. The health check on the British consumer appeared to show households becoming wary of the government’s tax credit cuts next year, which will put a brake on their spending power.
The high street chain Argos also issued a profits warning, saying it was nervous about recouping all the money it had spent in preparation for Black Friday.
The recurring theme throughout the current run of 29 consecutive months of year-on-year retail sales rises is that those sales have been dependent on consistent and heavy discounting, something Black Friday will only exacerbate.
As the latest figures show, shop prices fell by 3.6% in September compared with 12 months ago, the joint-weakest inflation level on record. Even excluding petrol, the figure was -2.3%.
So more shopping and bigger sales volumes do not necessarily help a retailer’s bottom line. Argos now finds itself in a situation where it needs to invest more heavily just to stand still.
Consumers, on the other hand, will continue to enjoy cheaper products. They might be holding off on purchasing big-ticket items, such as a new kitchen, but the Markit survey showed the bulk of households were enjoying bigger disposable incomes thanks to pay increases and inflation staying close to zero. They were happy to eat out, buy clothes and trade up to the latest smartphone.
Capital Economics concluded: “While consumer confidence slowed in September, it remains at an elevated level by past standards. Accordingly, with strong fundamentals still in place, we are optimistic that the consumer recovery will maintain a strong pace over the rest of the year.”
Over at Hamleys – which was sold for just £60m only three years ago to its French owners – staff will be stacking Star Wars Lego kits from floor to ceiling.
